Get ahead of tax season with proactive strategies that can help you maximize deductions, minimize liabilities, and set the stage for a financially successful new year.
Maximize Your Deductions Before the Deadline
Year-end tax planning is your best opportunity to ensure you’re not leaving money on the table. As December 31 approaches, it’s crucial to take stock of all available deductions and credits that you may be eligible for. Review your expenses—especially those related to your business, healthcare, and home office—to determine what can be accelerated or prepaid before year-end to maximize your tax savings.
Consider making additional deductible purchases or payments, such as contributing to a Health Savings Account (HSA), paying property taxes, or making year-end business investments. For those who itemize, bundling charitable contributions or medical expenses into a single year can help push you above the standard deduction threshold and unlock valuable tax benefits.
Smart Investment Moves to Lower Your Tax Bill
Your investment portfolio offers powerful tools for tax optimization before year-end. One of the most effective is harvesting capital losses. By selling under-performing investments, you can offset realized capital gains, and if losses exceed gains, you can deduct up to $3,000 against ordinary income—with any excess carrying forward indefinitely.
If you hold appreciated assets, consider donating them directly to charity instead of cash. This strategy enables you to avoid capital gains tax on the appreciation and allows you to deduct the full fair market value if you itemize. Additionally, review your portfolio for rebalancing opportunities, which can align your investments with your risk tolerance while simultaneously harvesting tax losses. Always coordinate these moves with your tax advisor to avoid wash sale rules and other pitfalls.
Retirement Contributions: Boost Savings and Reduce Taxes
Maximizing retirement contributions before the calendar year ends can provide a double win: lowering your current year’s taxable income while growing your nest egg for the future. For 2024, contributions to employer-sponsored 401(k) plans and traditional IRAs are generally deductible, subject to income limits and plan rules.
If you’re over age 50, take advantage of catch-up contributions to further increase your tax-advantaged savings. Business owners may also consider establishing or funding SEP IRAs or Solo 401(k)s. Review your current year contributions and, if possible, make additional contributions to reach the maximum allowable limits. Not only will this reduce your taxable income, but it also positions you for greater long-term financial security.
Charitable Giving Strategies for Maximum Impact
Strategic charitable giving can significantly reduce your tax liability while supporting causes you care about. For those over age 70½ with IRAs, consider a Qualified Charitable Distribution (QCD). This allows you to donate up to $100,000 directly from your IRA to a qualified charity, reducing your taxable income and satisfying required minimum distributions (RMDs)—without the need to itemize deductions.
Alternatively, donating highly appreciated stock from your taxable investment account can be more tax-efficient than giving cash. This approach eliminates capital gains taxes and allows you to deduct the full value of the stock if you itemize. Be sure to initiate these transfers well before December 31 and retain all documentation from the receiving charities for your records.
Essential Documents and Records to Organize Now
Gathering and organizing your tax documents before year-end is a proactive step that pays dividends come tax season. Start by collecting all relevant income statements, including W-2s, 1099s, and records of investment income or distributions. Don’t forget documentation related to deductions—such as receipts for charitable donations, property tax statements, medical bills, and proof of retirement contributions.
Review your year-to-date financials for any discrepancies or missing items, and ensure you have confirmation letters for any charitable gifts or QCDs. If you’ve made any significant financial changes—like selling a business, making a large investment, or shifting income—consult with your tax advisor to anticipate any additional documentation or planning needs. Being organized now will minimize stress, maximize your deductions, and ensure a smoother filing process in the spring.
