5 Smart Year-End Strategies to Save on Your Taxes

As the year draws to a close, it’s the perfect time to explore ways to reduce your tax liability and maximize your financial benefits. Here are five actionable strategies to help you save before the calendar flips:

1. Offset 401(k) Withdrawals with an HSA Contribution

If you’ve had to make an early withdrawal from your 401(k), consider offsetting some of the tax impact by contributing to a Health Savings Account (HSA). An HSA offers triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. This strategy can reduce the penalties and taxes associated with early 401(k) withdrawals while building a reserve for future healthcare costs.

2. Harvest Tax Losses

If you’ve experienced losses in your investment portfolio this year, now is the time to use them to your advantage. By selling investments at a loss, you can offset gains from other investments. Additionally, if your losses exceed your gains, you can deduct up to $3,000 against your ordinary income and carry over any remaining losses to future years.

3. Max Out Retirement Contributions

Contributing to tax-advantaged accounts like a traditional IRA or 401(k) before the end of the year can lower your taxable income. For 2024, you can contribute up to $23,000 to your 401(k). For traditional IRAs, the limit is $7,000 (or $7,500 if you’re 50 or older). These contributions not only reduce your current taxable income but also boost your retirement savings. For more information read this: 401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000 | Internal Revenue Service

4. Make Charitable Contributions

Giving to qualified charities is a great way to make a difference and lower your tax bill. Donations of cash or property to eligible organizations can be deducted if you itemize your deductions. Be sure to keep records of your contributions, and for non-cash donations, consider obtaining a receipt or appraisal for larger items.

5. Defer Income and Accelerate Deductions

If you’re self-employed or have control over when you receive income, consider deferring some of it to the next year. This strategy can lower your taxable income for the current year. Simultaneously, accelerate deductible expenses like business purchases, medical expenses, or home office improvements to increase your deductions this year.

By implementing these strategies, you can reduce your tax burden and improve your financial standing as you head into the new year. For personalized advice and assistance, consult our tax professionals who can tailor strategies to your specific situation. Tax planning is the key to keeping more of your hard-earned money in your pocket!