As the end of the year approaches, it's prime time to make strategic moves that can boost your tax efficiency. Meeting certain December 31st deadlines can save you money, help you reach your financial targets, and reduce your tax liability for the year. Here’s your essential checklist to make the most of year-end financial planning.

1. Complete Roth Conversions

A Roth IRA conversion allows you to move funds from a traditional IRA or 401(k) into a Roth IRA. This conversion triggers taxes now but offers tax-free growth and withdrawals in retirement. Converting before December 31st means the conversion counts for the current tax year, potentially lowering your taxable income in retirement. We can work with you to determine if a partial or full conversion aligns with your tax planning strategy. Be mindful that conversions are not instantaneous. They will require documentation and processing by your financial institution, so it's best to complete this BEFORE the holiday season kicks off in November to ensure you meet the year-end deadline.

Deadline: December 31st

2. Take Required Minimum Distributions (RMDs) from Retirement Accounts

If you’re 73 or older, you’re required to take RMDs from certain retirement accounts, such as traditional IRAs and 401(k)s, by December 31st. Failing to take your RMD can result in a 25% penalty on the amount you should have withdrawn. Taking the distribution on time ensures you stay compliant and avoid penalties, while also factoring these withdrawals into your tax planning. We assist our clients in processing year-end RMDs.

Deadline: December 31st

3. Max Out 401(k) Contributions with Your Final Paychecks

Maximizing your 401(k) contributions boosts your retirement savings and reduces your taxable income, offering immediate tax benefits. For 2024, the contribution limit is $22,500, or $30,000 if you’re 50 or older. Ensure your final paycheck contributions bring you as close to the limit as possible to make the most of these savings opportunities. For employers, this is an ideal time to evaluate your benefits offerings to retain and attract top talent. We’re here to help with a comprehensive internal assessment of your benefits package to ensure it aligns with your talent recruitment and retention goals.

Deadline: Last paycheck of the year

4. Harvest Tax Losses to Offset Gains

Tax-loss harvesting can reduce your tax liability by selling investments that are underperforming to offset gains on your profitable assets. This strategy is particularly helpful in volatile markets where some investments may be down. The capital losses you realize by December 31st can help offset this year's gains and up to $3,000 of ordinary income.

Deadline: December 31st

5. Make Charitable Contributions for 2024 Tax Deductions

Charitable giving is a meaningful way to support the causes you care about while also lowering your taxable income. To qualify for a 2024 tax deduction, be sure to make your donations by December 31st. Donating appreciated stocks or mutual funds is an excellent way to avoid capital gains taxes and increase your impact. For nonprofit organizations, having a solid investment strategy can enhance your financial stability, making your mission more attractive to potential donors. We can help your organization develop a sustainable investment plan that not only strengthens your resources but also appeals to donors who seek to make a lasting impact.

Deadline: December 31st

6. Use Flexible Spending Account (FSA) Funds Before They Expire

FSAs are great for covering eligible medical expenses with pre-tax dollars, but any unused funds may be forfeited at the end of the year. Check with your employer to confirm if they offer a carryover or grace period, but generally, December 31st is the last day to spend FSA funds. Stock up on eligible items or schedule healthcare appointments to maximize your benefits.

Deadline: December 31st

7. Make Annual Gifts to Family or Friends Tax-Free

If you’re considering gifting cash or assets to family or friends as part of your estate planning, utilizing the annual gift exclusion can help you avoid gift taxes. For 2024, you can give up to $17,000 per recipient without affecting your lifetime estate tax exemption, making it a powerful way to share wealth without tax implications. We’re here to help you review your current estate and legacy plans to determine if a gifting strategy aligns with your long-term goals, ensuring that your wealth transfer intentions are both effective and tax-efficient.

Deadline: December 31st

8. Consider Qualified Charitable Distributions (QCDs) from IRAs

For clients over age 70½, Qualified Charitable Distributions (QCDs) offer a tax-efficient way to give directly to charity from your IRA. You can donate up to $100,000 annually per person, which counts toward your Required Minimum Distribution (RMD) without increasing your taxable income. QCDs allow for tax-free giving while supporting the causes that matter most to you. To simplify the process, we can help streamline your year-end gifting by transferring funds directly from your investment accounts to the nonprofit organizations you wish to support. This service saves you time, allowing you to enjoy the holiday season while making a meaningful impact.

Deadline: December 31st

Final Thoughts: Don’t Miss Out on Year-End Financial Opportunities

Taking action on these year-end financial moves by December 31st can set you up for tax savings and a more secure financial future. A proactive approach to managing Roth conversions, RMDs, tax-loss harvesting, and charitable giving can optimize your tax position and enhance your financial outlook for years to come. Connect today to ensure you’re maximizing your financial potential as the year comes to a close. For more insights on year-end financial planning and tailored advice, reach out. We’re here to help you make informed decisions.