Financial Moves to Make Before Dec 31st

Nov 14

As the year draws to a close, now is the perfect time to take a closer look at your finances and make strategic moves to set yourself up for success in the new year. These year-end financial actions can help you maximize tax benefits, boost your savings, and ensure you’re on track to meet your financial goals. Don’t leave money on the table—take action on these essential steps before December 31st!

✅ Year-End Financial Checklist:

1. Max Out Retirement Contributions
2. Review and Rebalance Your Investment Portfolio
3. Harvest Tax Losses and Gains
4. Use Your Flexible Spending Account Funds
5. Make Charitable Contributions
6. Review Health Savings Account Contributions
7. Contribute to a 529 Plan
8. Check Required Minimum Distributions (RMDs)
9. Plan for Business Expenses
10. Prepare for the New Tax Year

Max Out Retirement Contributions

401(k): For 2024, you can contribute up to $23,000 to your 401(k), or $30,500 if you’re over 50. 1

IRA: While you have until April of next year to contribute to an IRA, it’s a good time to review your finances now. The contribution limit is $7,000 (or $8,000 for those over 50). 1

Catch-Up Contributions: If you’re 50 or older, make sure you’re taking advantage of catch-up contributions, which allow you to put extra money into your retirement accounts.

Review and Rebalance Your Investment Portfolio

The end of the year is a great time to review your asset allocation and rebalance your portfolio to align with your risk tolerance and financial goals. For example, if stocks have outperformed bonds, your portfolio may need adjusting to avoid taking on more risk than you’re comfortable with.

Harvest Tax Losses

Tax-Loss Harvesting Example: Imagine you bought shares of Stock A at $5,000, but it’s now worth $3,000. By selling it, you can realize a $2,000 loss, which can offset gains from another investment, potentially reducing your capital gains tax. Tax-loss harvesting is an effective strategy to lower your tax liability while maintaining your desired asset allocation.

Watch Out for Wash Sales: When harvesting losses, be mindful of the wash-sale rule. This IRS rule disallows the deduction of a loss if you buy the same or a “substantially identical” security within 30 days before or after the sale.2 To avoid triggering a wash sale, wait 31 days to repurchase the same investment or consider reinvesting in a similar, but not identical, security.

Harvest Tax Gains

Tax-Gain Harvesting: For those in lower tax brackets, selling appreciated assets to take advantage of the 0% capital gains rate can be an effective strategy. By selling now, you reset the cost basis of the investment, potentially lowering future taxes. This strategy is particularly helpful for retirees or those in lower income years.3

Use Your FSA Funds

Many Flexible Spending Accounts (FSAs) follow a “use-it-or-lose-it” policy, which means you may forfeit any remaining funds after December 31st. Check your balance and consider using the funds on eligible medical expenses, such as prescriptions, dental care, or vision expenses.

Make Charitable Contributions

Donations made to qualified charities before December 31st may be deducted from your taxable income. Whether you’re donating cash, stocks, or other assets, charitable giving may provide an opportunity to support causes you care about while reaping tax benefits.4

Review Your Health Savings Account (HSA) Contributions

If you have a high-deductible health plan (HDHP), consider maximizing your HSA contributions. HSAs offer triple tax benefits: contributions are tax-deductible, growth is tax-free, and qualified withdrawals are tax-free. For 2024, contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up if you’re over 55.5

Contribute to a 529 Plan (Minnesota-Specific Benefits)

Minnesota Residents: The state offers two tax incentives for contributing to any 529 plan, regardless of location:

Minnesota State Tax Deduction: Deduct up to $3,000 (joint filers) or $1,500 (individuals) annually for 529 plan contributions.

Minnesota State Tax Credit: Eligible taxpayers can claim tax credit of up to $500. For joint filers with an adjusted gross income (AGI) under $93,610, the full credit is available, and it phases out at higher income levels.6

Check Required Minimum Distributions (RMDs)

If you’re 73 or older, you’re required to take RMDs from specific retirement accounts. Failing to take the required amount can result in a penalty of up to 25% of the RMD amount. Check with your financial advisor to make sure you’re on track to meet this requirement.7

Plan for Business Expenses and Deductions

Business owners should review potential deductions and plan end-of-year expenses, such as purchasing equipment, contributing to employee benefits, or funding a retirement plan. These expenses can help reduce your taxable income and support your business’s growth.

Prepare for the New Tax Year

Take time to consult with a financial planner or tax advisor about upcoming tax law changes or updates in your financial situation. Planning ahead can ensure you’re prepared for the new tax year and set to make the most of available deductions and credits.

Final Thoughts

Taking these steps before December 31st can put you in a stronger financial position and help you start the new year with confidence. From maximizing retirement savings to leveraging Minnesota-specific tax benefits for 529 contributions, these moves may set the stage for a financially secure future. Remember, each person’s financial situation is unique, so consulting with a financial advisor can help tailor these strategies to your specific goals and needs.

Ready to take action? Schedule a year-end financial review with us to ensure you’re on track and maximizing your financial benefits. Let’s start the new year strong together!

Disclosures

Fortress Financial Group LLC (“FFG") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where FFG and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at https://fortressfg.net/. For current FFG information, please visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with FFG’s CRD# 315329

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.