Tax

 

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As the year draws to a close, it’s an ideal time to review your financial situation and make strategic moves to optimize your tax picture. At Intelligent Investing, we believe proactive tax planning is essential to effective wealth management. Thoughtful, year-end tax strategies can reduce your tax burden, enhance your financial flexibility, and maximize the value of your investments. By carefully managing taxes, you’re not only keeping more of what you’ve earned—you’re aligning your financial plan with your future goals.

At Intelligent Investing, we’re passionate about helping our clients navigate the complexities of tax planning with personalized advice and strategies tailored to your unique financial situation. If you’re looking to make the most of this year’s opportunities and set yourself up for success, we’re here to help.

Here are 20 essential year-end tax tips to consider:

1. Make Last-Minute Charitable Donations
   If you itemize, consider charitable contributions to maximize your deductions. Be mindful of your deduction limits so you can make the most of your generosity.
2. Optimize Your Annual Gift Exclusions
   The annual gift exclusion for 2024 is $18,000 per individual. Maximize tax-free transfers to family or friends as part of your long-term gifting strategy.
3. Evaluate Capital Gains and Losses
   Review your portfolio for potential capital gains and losses. Tax-loss harvesting allows you to offset gains with losses, which can reduce your taxable income. If your net capital loss exceeds the $3,000 annual limit, you can use the remaining amount to lower your ordinary income up to this limit each year and carry forward any additional losses to future tax years. This strategy can help manage your tax bill both now and in the years ahead.
4. Use the Kiddie Tax Threshold
   If your child has unearned income, consider the kiddie tax rules. Up to $2,600 of unearned income can be taxed at your child’s lower rate—helping you reduce the family’s overall tax burden.
5. Contribute to Retirement Accounts
   Max out contributions to IRAs, 401(k)s, and other retirement accounts. These contributions reduce taxable income and help fund your retirement.
6. Consider Donating Appreciated Stock
   Donating appreciated investments (held for over a year) can yield a double tax benefit: avoid capital gains tax on the growth and receive a charitable deduction for the full value. For investments held less than a year, your charitable deduction is generally limited to the cost basis (what you originally paid for the stock), not its current market value. This means you won’t be able to deduct the full appreciated value of the stock.
7. Confirm RMD Compliance
   If you’re over 73, ensure you’ve taken your required minimum distribution (RMD) from traditional retirement accounts. Missed RMDs can incur a steep penalty. We handle this for all our clients to ensure no RMDs are missed.
8. Maximize Tax-Free Accounts
   Check your Flexible Spending Accounts (FSAs) and dependent care accounts to ensure you’ve spent funds that won’t roll over into the new year. Make the most of those contributions.
9. Plan for Roth IRA Conversions
   Consider a Roth IRA conversion if it aligns with your tax strategy. Converting now can create tax-free growth in future years, especially if you’re in a lower tax bracket.
10. Review W-2 Withholdings
    If you expect a significant change in income or deductions, adjust your W-2 withholdings for the upcoming year to avoid surprises.
11. 11. Contribute to a 529 College Savings Plan
    If saving for a child’s or grandchild’s education is one of your goals, consider contributing to a 529 plan before year-end. Many states (like South Carolina) offer a tax deduction or credit for contributions, and the funds grow tax-free if used for qualified educational expenses. It’s a valuable tool to help reduce future education costs while potentially lowering your current tax burden.
12. Consider Tax-Advantaged Health Accounts
    Fully fund your Health Savings Account (HSA) if you have a high-deductible health plan. HSAs offer a triple tax benefit—tax-free contributions, growth, and withdrawals for qualified expenses.
13. Make Final Estimated Tax Payments
    If your withholding or estimated payments are falling short, make a final estimated tax payment by January 15 to avoid potential penalties.
14. Organize Your Tax Forms
    List expected 1099s, W-2s, and other tax forms. Preparing early makes filing smoother and helps catch any errors from financial institutions.
15. 15. Consider Accelerating Deductions or Deferring Income
    If you’re able, consider accelerating deductions into this year, such as paying property taxes or making mortgage interest payments early. Conversely, if you anticipate being in a lower tax bracket next year, you might choose to defer income to the following year. This strategy can help you manage your taxable income and potentially lower your overall tax liability, depending on your current and future financial situation.
16. Plan for AMT Exposure
    High earners may be subject to the Alternative Minimum Tax (AMT). Review deductions that could trigger AMT, like state and property taxes, and adjust your plan accordingly.
17. Pay Off Deductible Expenses Early
    Similar to the idea mentioned in 15., consider prepaying certain deductible expenses—such as mortgage interest or medical bills—if you’re close to maximizing your itemized deductions this year.
18. Rebalance Your Portfolio for Tax Efficiency
    Rebalance your investments as part of year-end planning. This helps align with your target allocations and can minimize potential tax surprises next year. We monitor and rebalance our clients’ portfolios automatically and throughout the year.
19. Plan for Non-Cash Contributions
    Donated items like clothing or household goods can be deductible if donated to a qualified charity. Remember to get a receipt and document the fair market value.
20. Prepare for Higher Standard Deductions
    Similar to ideas mentioned earlier, if you won’t exceed the standard deduction this year, consider bunching deductions into every other year (e.g., doubling up on charitable gifts) to maximize tax savings.

At Intelligent Investing, we view these tax strategies as essential components of your financial plan. Our fiduciary approach ensures that each strategy aligns with your long-term goals, reduces tax burdens, and preserves wealth for the future. 

Feel free to reach out for a complimentary call or coffee. Now’s the time to take action, and we’re here to help every step of the way. Let’s end the year with a strategic approach that sets you up for financial success in 2025 and beyond.

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Disclosure: This blog may reflect the perspectives and research of Intelligent Investing and, where applicable, incorporates insights from guest interviews or expert opinions. Any external views or opinions shared do not necessarily reflect the stance of Intelligent Investing. We may also utilize tools such as ChatGPT to enhance readability, grammar, and flow, while all core ideas remain proprietary to our firm.

Please note that Intelligent Investing does not provide specific tax or legal advice. All investments carry risks, including the potential loss of principal, and past performance is not indicative of future results. Any specific securities, sectors, or investment strategies mentioned are for informational purposes only and should not be considered a recommendation. We encourage readers to consult with Intelligent Investing for advice tailored to their unique financial situation. Unauthorized reproduction or distribution of this content is prohibited without proper credit to Intelligent Investing.