As the end of the year approaches, it’s the perfect time to review your financial situation and make strategic tax planning moves. Taking advantage of year-end opportunities can help you maximize deductions, minimize liabilities, and set yourself up for a stronger financial future. Here is a list of potential strategies to explore:

Maximize 529 contributions
A Christmas gift of learning is always in style! When you contribute funds to a 529 educational account, you not only provide your favorite student with lifelong knowledge, but many states will also award your generosity with tax deductions or credits. Couples can give up to the gift tax exclusion of $36,000 per beneficiary without needing to file a gift tax return, but states vary in how much of a contribution will result in a tax benefit.

Maximize 401(k) and/or IRA Contributions
Maxing out your retirement contributions is a win-win situation. Not only are you proactively building a comfortable nest egg for retirement, but this strategy will also save you money during tax season. Each individual can contribute $23,000 for the year. If you are 50 or older, or if you are turning 50 by Dec. 31, you can invest an additional $7,500 for a total of $30,500 annually. The IRA contribution limits for 2024 are $7,000 for those under 50 and $8,000 for those 50 or older.

Consider a Year-end Charitable Gift
The season of giving is a great time to make monetary donations to your church, a favorite medical organization, deserving animal shelter or struggling soup kitchen. Besides feeling good, when you make a qualified charitable distribution (QCD) from your IRA, your required minimum distribution (RMD) is fulfilled up to $100,000 for that year. Please note that while the RMD age is 73, you can make a QCD at age 70½. QCDs can be even more valuable than gifting directly to a charity and then taking a deduction since the income never hits your tax return at all.

Explore Tax-loss Harvesting
Tax-loss harvesting is when you sell a fund that is at a loss and then immediately purchase a similar fund. This way, you aren’t out of the market if it turns around. When you implement tax-loss harvesting strategies, losses may fully offset any capital gains income or up to $3,000 per year of ordinary income for any amount not used by capital gains. Losses must be generated before Dec. 31 to be part of your 2024 filing.

Explore Tax-gain Harvesting
In some situations, it makes sense to harvest gains sooner rather than later, especially if it can lead to lower taxes in the future. This approach can be highly beneficial, particularly if you can take advantage of the 0% capital gains tax bracket which goes up to $47,025 for single filers and $94,050 for a couple. While gains can be harvested at any time, the last few months of the year are ideal, as you’ll have a clearer understanding of your overall income and tax situation.

Review Roth Conversions
This consideration is particularly important in early retirement (pre-RMDs/Social Security) or if income is lower than normal for a year (e.g., one spouse took time off from work). Roth conversions allow you to pay taxes at lower rates while your guaranteed income is lower. Roth funds are funds you will never pay taxes on again. Tax rates are set to go up in 2026, if Congress does not act, since the Tax Cuts and Jobs Act will be sunsetting. 

Contribute to Non-deductible IRA/Convert to Roth IRA
Converting funds to Roth mean you will never pay taxes on those retirement dollars again. Also known as a “back-door” Roth, this approach may be useful for a non-working spouse, or a spouse who has all of their retirement savings within a 401(k), particularly for individuals or couples who make too much to contribute to a Roth IRA directly. You can fund an IRA without getting a tax deduction, and then convert the whole amount to a Roth IRA. One thing to note is that if you have other pre-tax IRA balances, this strategy often does not make sense since some or most of the conversion would then be taxable.

Take Your RMD
When it comes to tax savings, we cannot emphasize enough how important it is to take your Required Minimum Distribution (RMD) from your IRA, 401(k), inherited IRAs or other retirement account before Dec. 31. By not doing so, you would incur hefty tax penalties on the undistributed amount in addition to the regular taxes owed on the distribution. The new RMD age is 73.

By implementing some or all of these considerations by the end of 2024, you may save thousands of dollars in taxes. To fully take advantage of these tax-saving strategies, consult with us and your tax preparer.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party information and may become outdated or otherwise superseded without notice. Third-party information is deemed reliable, but its accuracy and completeness cannot be guaranteed. Individuals should speak with a qualified tax and financial professional based on their own circumstances to determine if the above scenarios are applicable.