It’s the perfect time to make strategic financial decisions that can help you save on taxes and improve your financial health as the end of the year approaches. At Arrow Advisors, we understand the importance of maximizing your tax benefits as you prepare to wrap up the calendar year. To help you finish strong, here are some year-end financial moves you should consider.

Maximize Retirement Contributions

Contributing to tax-advantaged accounts like 401(k)s or IRAs can significantly reduce your taxable income while boosting your retirement savings. For 2024, the 401(k) contribution limit is $23,000 or $30,500 if you are 50 or older. Contributions to a traditional IRA may also be tax-deductible depending on your income. Be sure to make additional contributions before December 31st to take full advantage of this year’s tax benefits.

Review Capital Gains and Losses

If you have investments in taxable accounts, now is the time to assess your portfolio for opportunities to reduce taxes on gains. By selling underperforming investments, you can offset capital gains with losses, also known as “tax-loss harvesting” which can lower your overall tax burden. 

Make Charitable Contributions

Charitable giving is not only a way to support causes close to your heart, but it can also provide valuable tax benefits. Donations to qualified organizations may be tax-deductible if you itemize deductions. Consider donating appreciated assets like stocks to avoid paying capital gains taxes while still receiving a deduction based on the asset’s market value. 

Leverage Tax Credits

Tax credits can reduce the amount of tax you owe making them a powerful tool for managing your tax liability. Common credits include the Child Tax Credit, the American Opportunity Tax Credit (for educational expenses), and credits for renewable energy improvements. 

Defer Income and Accelerate Deductions

If you expect to receive a bonus or other significant income before year-end, consider deferring it to January to reduce your taxable income for 2024. If you itemize deductions, try accelerating payments on deductible expenses like mortgage interest or medical bills before December 31st to maximize your deductions for this tax year. 

Manage Required Minimum Distributions (RMDs)

If you are 73 years old or older and have a traditional IRA, 401(k) or other retirement accounts, remember that you must take your RMD by December 31st to avoid penalties. If you don’t need the income from your RMD, consider making a qualified charitable distribution (QCD) as it allows you to donate directly to a qualified charity, which can satisfy your RMD requirement and exclude the income from your taxable earnings. 

Maximize Health Savings Account (HSA) Contributions

If your’e enrolled in a high-deductible health plan, don’t forget to contribute to your HSA. For 2024, individuals can contribute up to $4,150 and families can contribute up to $8,300. These contributions are tax-deductible and withdrawals for qualified medical expenses are tax-free, making this a great tool for healthcare planning and tax savings. 

You can reduce your tax bill and strengthen your overall financial position by taking these strategic financial actions before December 31st and at Arrow Advisors, we can help you navigate these year-end decisions and ensure you’re making the most of your opportunities. 

Reach out to us today for personalized financial guidance to close out the year with confidence!