Ultimate Guide: Maximizing Your Year-End Financial Moves for 2024 Success

As 2024 year-end financial moves, there’s still time to implement a few strategic financial moves that could lower your tax burden, enhance your savings, and prevent penalties. Here are some effective actions to consider before the clock runs out on the year:

1. Optimize Your Investment Portfolio

Take a close look at your taxable investment portfolio to identify potential gains and losses. By strategically selling assets, you can balance out your capital gains and losses for tax efficiency. This process, known as tax-gain harvesting, allows you to offset taxable gains with losses.

For instance, if you have $10,000 in gains and $12,000 in losses, you can eliminate the tax liability on the gains and even deduct $2,000 from your regular income. You may carry over any remaining losses for future tax years. However, be mindful of the wash-sale rule, which restricts repurchasing the same or a substantially identical investment within 30 days of the sale. Violating this rule disqualifies your loss from being applied to your taxes.

2. Maximize Retirement Contributions

Although it may be too late to increase contributions to your workplace retirement plan, you can still contribute to an Individual Retirement Account (IRA). The contribution limit for 2024 is $7,000, with an additional $1,000 catch-up allowance if you’re 50 or older.

A traditional IRA contribution offers immediate tax benefits by reducing taxable income for the year, while a Roth IRA grows tax-free and provides tax-free withdrawals in retirement. Contributions to an IRA can be made up until the tax filing deadline, typically April 15 of the following year.

3. Make Tax-Efficient Gifts

Generosity can also be a tax-smart strategy. In 2024, you can gift up to $18,000 per person without reporting it for gift-tax purposes. Couples can double this amount to $36,000 per recipient. These gifts can be direct or channeled into accounts like 529 plans or IRAs for your beneficiaries.

If you’re gifting appreciated securities, this strategy may allow the recipient to sell the asset with minimal or no tax burden, especially if their income falls within lower tax brackets. Additionally, gifting during your lifetime can help reduce the size of your taxable estate, which is particularly advantageous in states with low estate tax exemption thresholds.

4. Use Your Flexible Spending Account (FSA)

An FSA is a tax-advantaged account for covering eligible health-related expenses. However, these funds are often “use-it-or-lose-it,” meaning unspent money may be forfeited after the plan year ends. Some employers offer flexibility, such as a $640 carryover or a grace period extending up to 2.5 months into the next year.

Review your employer’s rules and make necessary claims for eligible expenses, such as medical supplies or dependent care, before the deadline.

5. Take Required Minimum Distributions (RMDs)

If you’re 73 or older, ensure you meet the deadline for required minimum distributions (RMDs) from your tax-deferred retirement accounts. The deadline is December 31, except for first-year RMDs, which may be delayed until April 1 of the following year.

Missing an RMD triggers a hefty excise tax—25% of the amount not withdrawn, reduced to 10% if corrected within two years. Beneficiaries of inherited accounts must also follow these rules. Seek guidance from a tax advisor to navigate these complex regulations.

Conclusion

Taking advantage of these financial strategies before year-end can help you save on taxes, grow your wealth, and avoid penalties. Whether it’s optimizing investments, contributing to retirement accounts, making tax-efficient gifts, or managing FSAs and RMDs, these steps can make a significant difference. Consult with financial and tax professionals to tailor these tips to your unique circumstances.

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