
The year will be drawing to a close before you know it. Fall decorations line the aisles of stores, and 2025 seems way down the road. But when it comes to year-end tax planning, don’t wait until you smell the turkey roasting or are putting up the holiday lights to start tax planning in order to maximize your tax savings for 2024.
Now is the perfect time to review your finances and make strategic decisions that can reduce your tax liability. Year-end tax planning not only helps minimize your tax burden but also prepares you for the upcoming tax season.
Pedro Rincon, CPA/CVA, and a partner at Osborne Rincon CPAs, shares some advice for developing the most effective strategies for year-end tax planning.
1. Maximize retirement contributions
“Maximizing retirement contributions is one of the easiest and most effective ways to reduce taxable income,” said Rincon. For 2024, the contribution limits for a 401(k) are $23,000 ($30,000 if you’re 50 or older with catch-up contributions), and $7,000 for IRAs ($8,000 if you’re 50 or older). Maxing out these contributions before the year ends can help you lower your taxable income and build your retirement savings.
2. Take advantage of tax-loss harvesting
If you have investments in taxable accounts that have declined in value, you can sell them to realize a loss and offset gains in other investments. This strategy, known as tax-loss harvesting, allows you to use those losses to reduce your overall taxable income. The IRS permits up to $3,000 in net capital losses to offset ordinary income, and any additional losses can be carried over to future years. “Tax-loss harvesting can help reduce your overall tax burden,” added Rincon.
3. Make charitable donations
Charitable donations are a great way to reduce your taxable income while supporting a cause you care about. If you itemize deductions, donations made to qualified charitable organizations can be deducted from your taxable income. Donations of cash, appreciated assets or even unused household goods can all provide tax benefits. Remember to keep detailed records, as the IRS requires proof of contributions. “These donations not only give back to the community but can also be a powerful tax-saving tool,” said Rincon.
4. Review your portfolio for capital gains
If you’ve realized significant gains on investments this year, consider selling some underperforming assets to balance your capital gains with capital losses. Additionally, long-term capital gains (from investments held for over a year) are taxed at a lower rate than short-term gains. This can be an effective strategy if you anticipate your income will be higher in future years and want to lock in a lower tax rate.
5. Utilize flexible spending accounts (FSAs) and health savings accounts (HSAs)
If you have a flexible spending account (FSA), remember that most of these accounts have a “use-it-or-lose-it” rule, meaning any unspent funds at the end of the year are forfeited. Review your FSA balance and plan to use the funds before the year-end. Additionally, contributing to a health savings account (HSA), if you’re enrolled in a high-deductible health plan, can help reduce your taxable income. HSA contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free.
6. Defer income
“If you’re in a higher tax bracket this year, consider deferring income to next year to potentially lower your tax bill,” Rincon advised. If you’re self-employed or receive bonuses, consider deferring income until the next tax year, especially if you expect to be in a lower tax bracket. Pushing income into the next year can reduce your taxable income for the current year, potentially lowering your overall tax liability.
7. Take advantage of tax credits
“Don’t forget about tax credits — they are often more valuable than deductions because they directly reduce the amount of tax owed,” said Rincon. Tax credits like the Child Tax Credit or education credits provide direct reductions in tax liability and should be fully leveraged when possible. Tax credits offer a dollar-for-dollar reduction in your tax liability, so it’s essential to maximize them where possible.
8. Review withholding and estimated taxes
Ensure that your tax withholding or estimated tax payments align with your anticipated tax liability for the year. If you’ve underpaid taxes, you could be subject to penalties. On the other hand, overpaying can result in an unnecessary interest-free loan to the government. Adjusting your withholding now can help you avoid surprises when filing your return in April.
9. Consider Roth conversions
If you’re expecting a lower income this year or want to hedge against future tax rate increases, consider converting a portion of your traditional IRA to a Roth IRA. Roth IRAs are funded with after-tax dollars, but withdrawals in retirement are tax-free. A Roth conversion could be a smart move if you’re currently in a lower tax bracket, as it locks in today’s tax rate on your contributions and shields future earnings from taxation.
“It’s essential to review your withholding and estimated taxes now to avoid penalties or surprises in April,” said Rincon. “By taking action before December 31, you can reduce your tax liability, increase savings, and prepare for a smooth tax season.”
If you are looking to consult with a tax professional about tax planning, contact Osborne Rincon CPAs at 760-777-9805 or learn more about the firm at
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