SST’s Top 5 Year-End Tax Strategies
The last quarter of the year can be a hectic time for many, so it’s understandable if filing your 2023 taxes next year is the last thing on your mind. However, smart strategies implemented before Dec. 31 can ensure your upcoming tax preparation and filings go smoothly – and even save you money in the long run.
Below are five tips from SST Accountants & Consultants’ seasoned tax experts that you should consider before the year is over.
- Review your paycheck withholdings and adjust if necessary.
Avoid surprises at tax time by reviewing your current withholding amount to determine if it is appropriate. You can use the IRS’ Tax Withholding Estimator to analyze different scenarios and determine if adjustments are needed to maximize your refund or minimize your liability. Once changes are identified, you will need to file a new W-4 with your employer to ensure these changes are reflected in your paycheck for the remainder of the year. - Consider deferring income.
Deferring income and increasing pre-tax contributions can minimize your current year income tax liability. For example, shifting payment of your end-of-year bonuses to 2024 could be a good strategy if you believe you will be in a lower tax bracket in 2024. While taxes related to these earnings will not be eliminated, they will be deferred to the subsequent year. You should also consider maxing out pre-tax contributions to your retirement and health accounts (ex. 401K, IRA, HSA) or spending any remaining funds from your flexible spending account (FSA). - Take advantage of investment losses through tax-loss harvesting.
Offset investment gains with realized losses through tax harvesting. According to S. Bank, tax-loss harvesting is the sale of taxable investment assets such as stocks, bonds and mutual funds at a loss to lower your tax liability. This loss can be applied against capital gains elsewhere in your portfolio, reducing the total capital gains tax you owe and allowing your portfolio to grow and compound more quickly. Tax-loss harvesting requires diligent portfolio tracking and market monitoring, so it’s strongly recommended you consult with a financial professional when implementing this strategy. - Donate to qualified charitable organizations.
End-of-year charitable contributions or donations can help you lower your taxable income through deductions. Generally, you can deduct up to 60% of your adjusted gross income via charitable donations. However, you may be limited to 20%, 30% or 50% depending on the type of contribution and/or organization. If you have questions about a specific organization or donation, SST’s nonprofit experts are always available to assist. - Review refundable and non-refundable tax credit opportunities.
According to the IRS, a tax credit is a dollar-for-dollar amount taxpayers can claim on their tax return to reduce the amount of income tax they owe and potentially increase their refund. Take inventory of the latest tax credits and see which opportunities you may still qualify for before year-end.
Implementing these strategies now can position you for success and help ensure a smooth tax season in the New Year. For personalized tax support and perspective that’s focused on your success, contact the financial experts at SST.
