Today we’re diving into the top 10 things you need to consider before the year wraps up to ensure your financial house is in tip top shape for 2024. As we approach the end of the year, it’s a perfect time to reflect on your financial journey and make strategic decisions that can significantly impact your future. Going through this end of year financial checklist is not just about tying up loose ends, it’s about setting yourself up for success in the coming year. It’s an opportunity to reassess your goals, optimize investments, and ensure that you’re making the most out of your financial resources. And to make things even easier, we put together a free checklist available in the description below to help you stay on track and ensure that you don’t miss any critical steps. So let’s get started on securing a prosperous financial future. I’ve broken down our top 10 list into separate sections, and our first section involves asset issues.
So number one, unrealized investment losses. If your taxable investment accounts have taken a hit this year, it might be a golden opportunity to sell off some of those underperforming assets. Why? Because you can use those losses to offset any capital gains you might have. And if your losses exceed your gains, you can even deduct up to $3,000 against your ordinary income. It’s a strategy known as tax lost harvesting, and it can be a powerful tool in reducing your tax bill. Number two, taxable account investments. If you have investments in mutual funds or ETFs within a taxable account, be on the lookout for potential capital gain distributions towards the end of the year. These distributions can increase your tax liability, so it might be worth considering strategies to minimize that impact, such as selling shares before the distribution date, or investing in tax efficient funds. Number three is all about income predictions.
If you’re expecting a significant change in your income next year, whether it’s due to a job change, retirement, or any other reason, it’s crucial to plan ahead strategies like Roth IRA and 4 0 1 K conversions can help you manage your tax liabilities more effectively, ensuring that you’re not paying more in taxes than you need to. At number four, we have capital losses similar to our first point. If you’ve realized capital losses this year, you can use them to offset any capital gains. And if your losses exceed your gains, you can reduce your ordinary income up to $3,000. It’s a valuable strategy that can help you turn financial lemons into lemonade. Number five, understanding your tax. Your tax bracket plays a crucial role in determining how much you owe to Uncle Sam. If you’re close to the threshold of a lower tax bracket, it might be worth exploring strategies to reduce your taxable income, such as making deductible IRA contributions or harvesting capital losses. Number six is crucial for business owners. If you own a pass through business such as an S corporation or LLC, make sure you’re familiar with the qualified business income deduction or QBI. This deduction allows eligible business owners to deduct up to 20% of their qualified business income,
Potentially saving you thousands on your tax bill. Number seven, smart expense management. Sometimes it makes financial sense to accelerate certain expenses into the current tax year to reduce your taxable income. This could include prepaying mortgage interest making, charitable donations, or funding retirement accounts. And remember, timing is everything, especially when it comes to opening retirement accounts, as many of them need to be established before the end of the year. Number eight, marital status changes. Life happens, and sometimes that means changes in your marital status. Whether you’ve gotten married or divorced this year, it’s important to understand how these changes will impact your tax situation and plan accordingly. Number none, maximizing savings. If you find yourself with extra cash towards the end of the year, consider contributing to an HSA or maxing out your employer retirement plan contributions. And if you’re saving for a child’s education, a 5 2 9 account offers tax-free growth and withdrawals for qualified education expenses.
Last but certainly not least, estate planning. If you’ve experienced major life changes or asset transactions this year, it’s time to review your estate plan to ensure it still aligns with your goals. And remember, there are tax efficient ways to gift your loved ones, including the annual gift tax exclusion, which allows you to give up to $17,000 per recipient tax free. And here’s a bonus tip, insurance planning. Don’t forget to check your FSA balances before the year ends. Some plans allow you to roll over a portion of your unused funds, but others operate on a use it or lose it basis and make sure you’re maximizing the benefits of your dependent care, FSAs and health insurance plans. And there you have it, a comprehensive guide to wrapping up your financial year. These considerations are key to ensuring a prosperous future need more personalized advice. Luminary Financial Advisors is here to help. Reach out to us anytime by using our calendar link in the description section. And if you found this video helpful, don’t forget to share and subscribe for more financial insights. Here’s to a successful and financially sound New year. Cheers everyone.
