Editor's Note: This story comes from Wealthramp.
As we come to the end of another tax year, there’s still time to explore strategic financial decisions that could significantly reduce your tax obligation for 2024 and beyond.
Even if you’re managing your own investments, consider consulting with a qualified financial planner to help you implement money-saving moves.
Here are some time-sensitive tax planning strategies to consider.
1. Review Your Asset Allocation
Review your entire portfolio, and rebalance to ensure your asset allocation still aligns with your personal risk profile.
This step is especially important in this highly volatile election-year market.
2. Harvest Your Losses (and Maybe Some Gains)
Look for tax-loss selling strategies (harvesting) to offset any capital gains; you may be able to invest in assets with similar exposure without triggering wash sales.
If you’re in a low taxable income bracket, consider tax-gain harvesting to optimize your portfolio.
Learn more about how capital gains will impact you.
3. Time Big Expenses and Revenue Events
Look at preliminary tax projections and evaluate whether it makes sense to defer or accelerate any income and/or expenses. Smartly timing income recognition or big expenses based on your tax bracket can have a meaningful impact on your tax bill.
Keep in mind that 2024 tax brackets have undergone several changes from prior years.
Discover which tax bracket you’ll fall under for 2024, the year for which Tax Day is April 15, 2025.
4. Max Out All Your Tax-Advantaged Accounts
Ensure you fully utilize all your tax-advantaged retirement, savings and gifting opportunities — don’t overlook education savings programs, qualified charitable distributions, donor advised funds, family member gifting, health savings accounts (HSAs), flexible spending accounts (FSAs), and more.
5. Update Your Roth Conversion Analysis
This might be the year to take advantage of the Roth conversion rules.
Update or start your Roth conversion analysis and complete any IRA and/or backdoor Roth IRA conversions that make sense for you.
6. Pay Attention to Expiration Dates for Temporary IRS Code Reductions
Review tax rate reductions under the Tax Cuts & Jobs Act (TCJA) that are set to expire in 2025.
Some of these provisions may require action soon — don’t just assume these reductions will all be extended.
7. Don’t Forget Those Outstanding Stock Options
Review your company-granted stock options, and determine if 2024 is the right year to exercise or disqualify part or all of them; start your exercise plan for 2025.
Stock options are often overlooked. Think about your ISO and stock option strategy.
8. Analyze Your Social Security Claiming Strategy
If you’re eligible to claim Social Security benefits but have not done so yet, identify the claiming strategy that will be best for your income needs and tax bracket. Consider ways to minimize your overall taxes on withdrawals.
For more insights, our good friend Terry Savage, financial columnist for the Chicago Tribune, frequently provides valuable advice on claiming strategies.
9. Review Your RMD Distribution Strategy
If you have an inherited IRA or are subject to required minimum distributions (RMDs), ensure you fully understand the rules that apply to your specific situation. These rules are complex, and it’s important to be compliant in order to avoid stiff penalties.
Work with a financial professional to develop a distribution strategy that minimizes the total tax burden over the lifetime of the distributions.
10. Seek Expert Guidance
Tax planning is a year-round sport. Discuss your comprehensive tax situation with a qualified financial advisor to be sure you’re proactively using the code to your benefit.
Expert guidance can make a significant difference in your financial outcomes.
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