As 2024 draws to a close, individuals and investors alike are gearing up for year-end financial planning. With a new year on the horizon, now is the perfect time to take stock of your financial situation and make necessary adjustments to maximize your savings and minimize your tax liabilities.

The importance of year-end planning cannot be overstated. It serves as a crucial checkpoint for assessing your financial health and preparing for the upcoming tax season. According to financial experts, this period is critical for evaluating your tax strategy, retirement readiness, and estate planning. Furthermore, it offers an opportunity to engage in tax-efficient charitable giving.

Lisa Featherngill, a senior vice president and national director of wealth planning at Comerica Wealth Management, emphasizes the necessity of understanding your current financial position. “If you don’t know what you’ve got, how can you plan to get to where you want to be?” she asks, highlighting the need for a comprehensive overview of your finances.

Stewart Willis, president and high-net-worth advisor at Asset Preservation Wealth & Tax, warns of the potential pitfalls of neglecting year-end planning. He states, “The risk is that you could leave money on the table,” suggesting that a thorough financial checkup can uncover hidden opportunities and risks that may affect your financial future.

This year, the looming uncertainty surrounding the potential expiration of the tax provisions from the Tax Cuts and Jobs Act (TCJA) adds an extra layer of complexity to year-end planning. If Congress does not act, the favorable tax rates established by the TCJA will revert to the higher rates in effect prior to 2018, starting in 2026. Featherngill sees this as an opportunity for individuals to take advantage of the current lower tax rates while they still can.

To effectively prepare for the upcoming tax season, individuals should begin by estimating their taxable income for 2024. Mark Steber, chief tax information officer at Jackson Hewitt, suggests reviewing your latest pay stub and factoring in any additional income and tax withholdings for the remainder of the year. This will provide a clearer picture of whether you might owe money or expect a refund come Tax Day in April.

If projections indicate that you will owe additional taxes, there are proactive measures you can take to mitigate your liability. One effective strategy is to maximize contributions to your traditional 401(k), which can effectively reduce your taxable income. If you haven’t already reached the contribution limit for the year, increasing your contributions in the final paychecks of 2024 can provide significant tax benefits.

For individuals aged 50 and older, there are additional catch-up contribution options available. You can contribute an extra $7,500 to your 401(k) and an additional $1,000 to your IRA if you are 55 or older. These contributions not only enhance your retirement savings but also offer immediate tax deductions that can help lower your taxable income.

Deferring income is another strategy that can be beneficial as the year comes to a close. By delaying the receipt of certain income until 2025, you may be able to lower your tax liability for the current year. This can be particularly advantageous if you anticipate being in a lower tax bracket next year.

In addition to these strategies, it’s essential to evaluate your overall investment portfolio and make any necessary adjustments. This includes assessing your asset allocation and ensuring that your investments align with your long-term financial goals. Rebalancing your portfolio can help mitigate risk and enhance potential returns as you head into the new year.

Moreover, individuals should also take the time to review their estate plans. As circumstances change, including shifts in family dynamics or financial situations, it’s important to ensure that your estate plan reflects your current wishes and provides for your loved ones effectively.

Tax-friendly charitable giving is another avenue worth exploring as the year ends. Making donations to qualified charities can not only provide a sense of fulfillment but also offer tax deductions that can reduce your overall tax burden. Be sure to keep thorough records of your donations to substantiate your claims when filing your taxes.

As we approach the end of 2024, taking proactive steps in your financial planning can yield significant benefits. By understanding your financial situation, making informed decisions, and implementing effective strategies, you can position yourself for a successful financial future. The final months of the year present a valuable opportunity to optimize your tax situation and enhance your overall financial well-being.

In summary, year-end planning is an essential process that can save you money and help you achieve your financial goals. By staying informed and taking action now, you can make the most of the remaining days of 2024 and set yourself up for success in the new year.