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Tis the Season: End-of-Year Tax-Saving Strategies

As the year draws to a close, so does the window for strategic tax planning and benefits. The decisions you make regarding your finances before December 31st can significantly impact your tax liability and overall financial well-being for the year ahead. Here we’ll explore end-of-year tax-saving strategies you can take advantage of before the year-end deadline to improve your financial picture in the upcoming year. 

Capitalize on Retirement Contributions

We’re nearing the end of the year, but there’s still time to boost and capitalize on your retirement savings. Be sure you are contributing to retirement accounts, like a 401(k) or an IRA, as they offer immediate tax advantages while helping ensure a secure, financially healthy future. Assess your current contributions and consider optimizing them before the yearly deadline to enjoy both short-term and long-term tax benefits. For IRAs, contributions can often be made until the tax filing deadline of the next year (usually April 15th). Remember: it is important to take a look at your entire financial picture before making significant changes to your financial plan. Talk to your financial advisor to find the best course of action to continue on a path to financial security. 

Leverage Health Savings Accounts and Flexible Spending Accounts

Health-related expenses can take a toll on your finances, but utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) can offer significant tax relief. Both HSAs and FSAs allow you to save for qualified healthcare costs. Any contributions made to these accounts may be tax-deductible, helping to reduce your taxable income. Whether or not you can open an HSA is dependent on your health insurance. These typically offer higher contribution limits and allow you to carry over funds. Opening an FSA is dependent on your employer. This type of account typically has lower contribution limits and does not allow you to carry over funds, so be sure to use them before the end of the year to avoid forfeiting them. Some FSAs allow a grace period or a limited carryover, but it depends on each individual plan. It is vital to weigh your options carefully and discuss any plans with your financial advisor to ensure the best financial outcome for you. 

Optimize Investment Portfolios

End-of-year is a great time to fine-tune your investment strategy. Consider tax-efficient investment practices such as:

  • Diversifying your account types
  • Holding investments for more than one year to qualify for lower capital gains tax rates

Take this opportunity to speak with a financial professional. They can help you diversify and rebalance your portfolio for tax efficiency and long-term growth. 

Charitable Giving for a Purpose

The final months of the year are the season of giving, and your generosity can translate into tax benefits. Charitable contributions to qualified organizations offer the opportunity for tax advantages including deductions, exemptions, and estate planning benefits. Consider various giving options to optimize your end-of-year tax-saving strategies. For example, explore bundling multiple years’ worth of donations into one tax year to exceed the standard deduction. Consult your financial advisor about your philanthropic giving to optimize your financial situation while bettering the world around you. Regardless of the details, remember to gather receipts and any other necessary documents surrounding your charitable contributions to claim the deductions. 

Explore Deductions and Credits

Among the end-of-year tax-saving strategies, there is an abundance of tax credits and tax deductions that should not be overlooked. Tax credits offer a direct reduction of your tax liability. Investigate credits such as:

Thoroughly research any deductions and credits to ensure you meet the eligibility criteria. Take the necessary steps to maximize them to put more money back in your pocket. If you need help discovering which ones are available to you, speak with a financial professional. 

After addressing your current end-of-year tax-saving strategies it is important to review your financial health as a whole. Revisit your financial goals and begin adjusting for the upcoming year. Being financially proactive and making informed decisions will help to optimize your tax situation and begin the new year on solid financial ground. If you are looking to improve your overall financial outlook and secure your financial future in the new year, contact the Blakely Financial team today. 

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.