Prepare for tax day: Tax-saving moves to consider before year-end

As the year comes to an end, it’s a great opportunity for you to take a moment to reflect on your financial situation and explore tax-efficient strategies. With Tax Day still a few months away, here are five steps you can take now to help maximize your tax benefits later.

1. Review your retirement contributions

Make the most of your retirement accounts

If you’re part of a workplace retirement plan, you should ensure you’re contributing as much as possible. For 2024, the contribution limit for 401(k) plans is $23,000, with an additional catch-up contribution of $7,500 for those age 50 and older. Maximizing these contributions can help secure your financial future while reducing your taxable income.

Understand Required Minimum Distributions (RMDs)

If you’re 73 or older, remember that you must take RMDs from your tax-deferred retirement accounts by year-end to avoid penalties. Consult with your Regional Manager to determine the correct RMD amount and explore your options for managing these distributions efficiently.

2. Consider Roth IRA conversions

It’s important to evaluate whether converting funds from a traditional IRA to a Roth IRA makes sense for you. This strategy allows for tax-free withdrawals in retirement but may have immediate tax implications. Discuss this option with your Regional Manager to see if it aligns with your long-term financial goals.

3. Optimize charitable contributions

Direct donations

If you’re planning to give to charity this year, consider making cash donations to qualified organizations. These contributions can be deducted from your taxable income, potentially reducing your overall tax liability.

Qualified Charitable Distributions (QCDs)

For those age 70½ or older, donating directly from an IRA can satisfy RMD requirements without increasing taxable income. You can contribute up to $100,000 per year directly to a charity, which can be a smart way to give back while managing taxes.

4. Utilize tax-loss harvesting

Take a close look at your investment portfolio in taxable brokerage accounts for opportunities to offset capital gains with losses. This strategy not only helps reduce your tax liability, but also allows you to rebalance your investments in line with your financial goals.

5. Help your loved ones with tax-free gifts

You can give away up to $18,000 in 2024, ($36,000 if married) per person to an unlimited number of people without eating into your lifetime estate and gift tax exemption. This won’t reduce your taxable income for the year, but it will allow you to strategically transfer wealth to your heirs tax-free. Note that distributions from the Plan will be subject to income tax.

We recommend taking proactive steps in managing your finances and taxes as the year ends. Consult with your Regional Manager to create a personalized year-end financial strategy that aligns with your goals and helps maximize tax efficiency.