Tax season 2024: A CT expert shares information you need to know

Tax Day is April 15 and still nearly two months away, but many people are getting their documents for their tax returns together now. Here are answers to questions many Connecticut residents have about filing their returns.

In general is it better to file well in advance of the deadline, or are there some instances where filing at the deadline is prudent?

It depends on your situation.  In most cases it is better to file early.  But currently it might be wise to hold off. On January 16, a $79 billion tax relief plan entitled, “The Tax Relief for American Families and Workers Act of 2024” passed through the House and currently is with the Senate. Some of the tax proposals include changes to the child tax credit, R&D expenditures, and bonus depreciation to name a few.

Some of the provisions are retroactive to 2023 and even if passed before April 15, 2024, the procedures might not be ready.  It might be prudent to file an extension if some of the provisions might affect your 2023 tax return.

What are changes on Connecticut or federal tax law that people need to know about this year, or need to start preparing for for next year?

Connecticut has been active in changing tax law, from income tax rates and earned income tax credits, but most do not apply until 2024.  The above mentioned tax legislation contains the biggest items for federal tax purposes in 2023.

Ever since the Tax Cuts and Jobs act was passed in 2018, many people have wondered about whether they are better itemization their deductions or using the Standard Minimum Deduction instead. What are some of the benefits or concerns of both?

If you can itemize, you should see a bigger benefit, as the amount of the deduction is higher than the standard deduction, thus lowering your tax liability.  If you find that you are constantly just under the itemized deduction threshold, consider bunching your charitable contributions, bunching medical expenses and prepaying mortgage interest.

One item I have had a lot of clients do is fund a Donor Advised Fund.  This way they can contribute a few years’ worth of charitable contributions and get the deduction in that year.  Then the donor advised fund can pay the various charities over the years.

For charitable contributions, can you talk more about using Donor Advised Funds and some of the benefits that may come with that?

Great question.  As I discussed before, Donor Advised Funds are a great tax planning tool to help you maximize your deductions and minimize your tax liability.

Let’s talk about retirement accounts and contributions made to such accounts. Do you encourage people to maximize those contributions each year, and if so why? How about Health Savings Accounts?

I would always rather pay myself first, to the extent your situation allows try to maximize your 401(k), SEP-IRA or Traditional IRA. These contributions are from pre-tax dollars and can help reduce your current year tax liability by reducing your taxable income.

The same goes for Health Savings accounts. With the increasing cost of health care and many people not getting the medical expense deduction as an itemized deduction, it is smart to contribute to a Health Savings Account.  The contribution is considered a pre-tax deduction, and it reduces your taxable income which in turn reduces your taxable income.

Lastly, for those who have not yet started preparing their 2023 state or federal tax returns, what advice would you give them as to what they need to do, and how quickly?

With so much compression at the tax deadline, it is best to get your information in as soon as possible. It seems like tax forms are getting to individuals later and later every year.

In addition, the tax code has become increasingly more complex and the later you wait, the harder it will be to get your return filed without extending it. I have many clients that send me in 99% of their information well ahead of time so that when that final tax form comes in, it is a quicker turnaround.

Andrew Lattimer is the managing principal of CLA West Hartford, a tax and consulting services firm.