Making Tax Moves at Year’s End

As financial planners, we look at specific events throughout a client’s lifetime to implement various planning strategies. There are weddings, sabbaticals, and retirements, just to name a few. A more frequent (annual) event specifically relates to taxes. You have the regular deadlines to file returns in April, and October if you extend, but one of the biggest opportunities comes at the end of the year.

Whether you’re a seasoned taxpayer or new to the world of taxes, there are several year-end tax strategies that can help you save money in both the short and long term. Here are three ideas to consider:


Contribute to Retirement Accounts

Maximize contributions to retirement accounts like 401(k)s, IRAs, or Roth IRAs. This not only helps you save for the future but can also lower your taxable income. Review your last paycheck to compare what you have saved for the year and how much room you have before maxing. You may need your normal paycheck for the holidays (see seasonal spending blog post), but it can help in your adjustments for the following year.


Tax-Loss Harvesting

If you have investments in taxable accounts, consider selling underperforming investments to offset gains and reduce your capital gains tax liability. You need to be aware of potential wash sales (buying the same or a substantially similar fund).


Defer Income

If you can control the timing of your income, consider deferring it to the next year to reduce your current-year tax burden.


Charitable Donations

Most tax-payers will use the standard deduction, but if you have historically itemized your tax deductions, you can make charitable contributions before the year ends. Donations to eligible charities can be deducted from your taxable income, so consider giving to causes you care about.


In addition to the money saving strategies, it’s a good time to ensure that your employer withholds the right amount of taxes from your paychecks. Adjust your W-4 if necessary to avoid overpaying or underpaying taxes.

If your financial situation is complex or you’re uncertain about the best year-end tax strategies for your specific circumstances, consulting with a tax professional or financial advisor is a wise move.

Keep in mind that tax laws can change, so staying updated and consulting a professional can help you make the most informed decisions regarding your year-end tax planning. With these strategies, you can potentially reduce your tax burden and start the new year on a financially savvy note. Happy tax planning!


For educational purposes only, not to be used as specific investment advice.


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