As the kids head back to school and football season begins, it’s time for our annual fall meetings where we meet with each of our clients to review their year-to-date (YTD) earnings and map out a tax strategy for the remainder of the year. These meetings are designed to ensure that we optimize every opportunity before the tax year closes. By leveraging a pro-forma tax projection based on recent pay stubs, we can identify where to make strategic moves and avoid missing any potential savings.
As the year draws to a close, it’s time to get serious about year-end tax planning. Whether you’re a Certified Registered Nurse Anesthetist (CRNA) working full-time, part-time, or juggling multiple W2 and 1099 gigs, these last few months of the year can make a huge difference in your tax bill.
Below, I’ve outlined eight key tax strategies every CRNA should consider to lock in the best possible financial outcome for 2024. And if you’re a prospective client thinking about how to improve your financial picture, these are the types of conversations I’ll walk you through in detail as we develop your year-end tax strategy.
1. Set Up a Solo 401(k) and Explore Mega Backdoor Roth Contributions
If you’re earning 1099 income, setting up a Solo 401(k) before December 31st could significantly reduce your taxable income while maximizing your retirement savings. This plan allows you to contribute both as an employee and an employer, offering an incredible opportunity to defer taxes on a large portion of your income.
Even better, you could take advantage of the Mega Backdoor Roth strategy, which involves contributing after-tax dollars to your Solo 401(k) and then converting those funds into a Roth IRA. This powerful strategy allows you to shelter even more income and secure future tax-free growth—but it must be done by the end of the year.
2. Max Out Your W2 Retirement Plan Contributions
If you’re employed in a W2 position, it’s crucial to ensure you’re on pace to max out your retirement plan contributions before December 31st. You can contribute up to $23,000 (plus catch-up contributions if you’re over 50), which not only boosts your retirement savings but also reduces your taxable income. For CRNAs with both W2 and 1099 work, it’s easy to overlook these limits, but they can make a significant impact when preparing your year-end tax projection.
3. Prioritize 1099 Shifts Once You’ve Hit the Social Security Wage Base
For CRNAs who split their time between W2 and 1099 work, once you’ve hit the Social Security wage base (currently $168,600 for 2024), picking up more 1099 shifts rather than W2 could save you money. After you hit this limit, you’re no longer required to pay the 6.2% Social Security tax on additional income from W2 work. Shifting to more 1099 work can lower your overall tax burden and give you more flexibility in how you manage your retirement savings through a Solo 401(k) or other self-employed plans.
4. Backdoor Roth IRA Contributions (and Avoid the Pitfall of Pre-Tax Funds)
If you’ve been thinking about contributing to a Roth IRA but exceed the income limits, the Backdoor Roth IRA is still a great option. You’ll need to contribute to a traditional IRA and then convert those funds to a Roth IRA before year-end to make it count for 2024.
However, be cautious if you have any pre-tax money sitting in a traditional IRA outside of your employer-sponsored plans, as that can trigger pro-rata tax issues during the conversion process. In cases like this, a reverse rollover—moving pre-tax IRA funds back into your employer-sponsored plan—might make sense to avoid additional tax complications.
5. Take Advantage of Tax Credits Like EV Purchases
Certain tax credits, like those for purchasing electric vehicles (EVs), require you to act before the year ends to qualify for the credit. If you’ve been eyeing an EV, purchasing one by December 31st could offer a sizable tax credit to help offset your liability in 2024. These credits are often overlooked but can provide significant savings if you make the right moves before the year closes.
6. Review Open Enrollment for Healthcare Benefits
As we enter open enrollment season, it’s time to review your healthcare benefits. Whether you’re working W2, 1099, or a mix of both, you may have options for adjusting your health plan, adding an HSA-eligible high-deductible plan, or optimizing your coverage for the coming year. If you opt for a high-deductible health plan (HDHP), consider maxing out your contributions to a Health Savings Account (HSA). Not only do you receive a tax deduction for contributions, but HSA funds grow tax-free and can be used tax-free for qualified medical expenses.
7. Make Estimated Tax Payments to Avoid Penalties
CRNAs working as independent contractors or juggling multiple 1099 jobs are required to make estimated quarterly tax payments. If your income has fluctuated throughout the year or you’ve taken on more shifts recently, now is a good time to ensure you’re on track with those payments. Not only will this avoid underpayment penalties, but it will also smooth out your cash flow by reducing the likelihood of a huge tax bill come April. For more details on how to ensure penalty-free payments, check out the safe harbor rules blog post we’ve covered in the past.
8. Tax-Loss Harvesting: Offset Gains by Selling Underperforming Investments
If you have investments in taxable accounts, tax-loss harvesting could be a valuable strategy before year-end. This involves selling investments that have lost value to offset capital gains from other investments, which in turn reduces your taxable income. Even if you plan to repurchase the same investment, waiting 31 days will help you avoid wash-sale rules while still securing the tax benefit. I’ve previously written a detailed blog post on tax-loss harvesting if you want to dive deeper into how this strategy works.
Wrap-Up
With the year coming to a close, now is the time to review your earnings, adjust your contributions, and take advantage of every tax-saving opportunity available. For CRNAs, managing income streams from both W2 and 1099 work can be complex, but with the right strategies in place, you can walk into 2024 in the best financial shape possible.
If you’re a CRNA looking to optimize your tax strategy before year-end, now is the time to act. Let’s schedule a meeting to review your YTD income, project your tax liability, and ensure you’re maximizing every opportunity available to you. I’ll guide you through each step so you can make confident, informed decisions. Don’t wait—reach out today to get started!