November 06, 2023

Small Steps to Take Before 2024 That May Help Save Big

While taxes may be the last thing on your mind during the holiday season, small steps you take now may result in big savings on your 2023 tax bill.

From maximizing deductions to optimizing investment strategies, some simple yet proactive measures can help you keep your hard-earned money in your pocket. I have compiled a list of questions and considerations you can start implementing now to potentially yield substantial tax savings in the future.

What’s new for you this year?

Have you experienced a significant life event, such as inheriting an IRA from an extended family member? Non-spousal IRAs have a 10-year window to make withdrawals, and with careful timing and tax planning, you can create a great strategy to incorporate this income into your financial plan.

Is this going to be a high-income tax year?

If the answer is yes, there are several things you can do:

  • Consider utilizing the $30,000 standard deduction if in the tax bracket for married seniors who are filing jointly.
  • Bunch property taxes and consider charitable donations. When contributions of appreciated assets are sent directly to a charity, save the acknowledgment letters.

Or a low-income tax year?

If 2023 wasn’t as profitable as you hoped, it’s important to keep Roth conversions top of mind and pay the tax withholding from after-tax funds. Be careful of a 5% tax penalty for underpayment of income tax. Many money markets are paying over 5%; don’t send in more than 90% of the tax owed.

Enjoying a gap year from work?

Don't waste the 10% and 12% marginal tax brackets; it may be beneficial to take long-term capital gains at the 0% rate. It’s an especially good time to diversify a concentrated stock position without paying tax.

Can't decide which charities to contribute to right now?

If you are in the giving spirit but can’t decide how you would like to donate your money, consider an irrevocable donor-advised fund (DAF) contribution. There is no time limit for the gifting, and you will receive a full deduction this year. For non-cash contributions such as clothing, furniture or vehicles, keep receipts and consider this an opportunity to declutter, reorganize and possibly deduct.

The gift of education is always in season.

  • Gifting to children using 529 college savings plans allows $17,000 annual contributions for up to five years of gifts, and you avoid the gift tax return.
  • Since these plans may also be used for K-12 tuition for private schools, front-end loading of a 529 can be beneficial. Starting next year, excess 529 funds may be contributed to Roth IRAs. Extra rules apply.
  • In addition, each state has their own rules and regulations. For instance, if you have a child or grandchild residing in the Sunshine State, the flexible Florida Prepaid College Plan may be used for tuition, fees, meals and reasonable housing. It may also be used for out-of-state public, private, trade and technical schools nationwide. The funds are guaranteed by the state of Florida, and open enrollment starts early next year.

Speaking of presents …

Is an important person in your life preparing for a major purchase, such as a home? Current rules allow you to give $17,000 to anyone each year, and these gifts don’t need to be reported. Anything above that amount requires a gift tax return.

Contribute to your future.

Don't overlook the free money that employers match in your company’s retirement plan. The maximum retirement plan deferral this year is $22,500, and if you’re 50 or older you may add another $7,500 for the catch-up contribution. Remember, more is better! Try to save a minimum of 16% of your gross salary for the most impact.

Do you have a high-deductible health insurance plan?

If you have a high-deductible health insurance plan, utilizing a health savings account (HSA) or flexible spending account may save you big bucks. These vehicles provide triple-tax savings by depositing tax-free funds into the account. Deposits grow tax-free, and investment earnings and withdrawals are also tax-free as long as they are used for qualified medical expenses, including routine care such as eye exams and dental cleanings. However, flexible spending accounts usually have “use it or lose it” requirements, so be sure to spend the money before the end of the year.

Review and rebalance investments and asset allocations.

Buckingham’s Head of Financial and Economic Research Larry Swedroe suggests rebalancing assets when an asset or category has drifted from its original target by an absolute percentage of 5% or a relative of 25%, whichever is less.*

There is a silver lining if you experienced losses.

Losses in taxable accounts provide an opportunity to swap exchange-traded funds (ETFs), mutual funds and stocks. The first $3,000 is deductible from ordinary income and above that can offset other capital gains. Don’t repurchase the same investment or you may get into trouble with the 30-day wash rule.

Take advantage of opportunities in retirement.

  • Folks aged 70½ or older may transfer funds directly to a charity from an IRA. This qualified charitable donation (QCD) may reduce Social Security tax.
  • Take required minimum distributions (RMDs) from your retirement accounts. The penalty for the amount not withdrawn has dropped to 25%; it was 50% until the SECURE 2.0 Act reduced it.

No matter your age, investment goals or financial objectives, taking small steps now to control your tax bill can optimize your deductions and potentially reduce your tax burden. I encourage you to explore both the recognizable and hidden opportunities you may have available at your fingertips. Please reach out to your advisor if you have any questions or to discuss the best options for your situation. If you are not presently working with one, we would love to help you. Please schedule a phone call or virtual conversation with our Client Development team.


Informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Individuals should speak with a qualified financial professional and qualified tax professional based on their own circumstances to determine if the above is applicable. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. R-23-6470

About the Author

Mary Baldwin

Wealth Advisor

Mary Baldwin enthusiastically enjoys working closely with clients to create, implement and monitor custom financial plans that provide a roadmap to peace of mind. She is dedicated to upholding the fiduciary standards for her clients and providing evidence-based wealth management rooted in academic research.

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