With just days left in 2023, it’s a prudent time to consider strategic financial moves that could significantly impact your tax return in 2024.
Surprisingly, even at this stage of the tax year, there are several actions you can take to potentially lower your tax bill. Here are three effective moves that might save you thousands of dollars.
Strategic Moves for Year-End Tax Savings
While you have until the April 2024 tax deadline to make 2023 contributions to a traditional or Roth IRA, the deadline for your 401(k) or similar retirement plan at work is the end of the year.
Consider boosting your retirement plan contributions for the last two months of the year. The IRS allows elective deferrals of up to $22,500 into qualified retirement plans or $30,000 for those aged 50 or older.
By increasing your contributions, not only will you reduce your taxable income, but you’ll also enhance your retirement savings.
Consider making your January mortgage payment before December 31, especially if you itemize deductions.
While the IRS allows a deduction for mortgage interest on up to $750,000 in qualified mortgage debt, you can deduct all the interest paid in a given year.
Making an early payment provides an additional deduction for the interest accrued in January. This tactic can be a smart year-end tax move for homeowners looking to maximize their deductions.
Charitable contributions are a common itemized deduction, and to count on your 2023 taxes, they must be completed on or before December 31. Explore various charitable giving options beyond monetary donations, such as donating clothing or toys.
Another tax-efficient method is donating appreciated stock, allowing you to take a deduction for the full market value without incurring capital gains taxes.
Enhancing your charitable giving not only benefits worthy causes but also provides potential tax savings.
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Tax Strategies That Make a Difference
Implementing these three strategies can have a significant impact on your tax bill.
Consider a scenario where you make an extra mortgage payment with $1,000 of interest, donate $2,000 worth of appreciated stock, and contribute an extra $2,000 to your 401(k).
In the 24% tax bracket, these moves could save you $1,200 on your federal tax bill. Remember that this calculation doesn’t include state tax savings or potential capital gains tax avoidance.
As the year draws to a close, taking advantage of these year-end tax strategies can make a substantial difference in your financial picture.
While not all strategies may apply to everyone, implementing even one or two of them could surprise you with a positive impact on your 2023 taxes.
Be proactive and consult with a financial advisor to ensure these moves align with your individual financial goals and circumstances.
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