How to Build a Tax-Effective Strategy for Your Financial Future NEW

1. Year-End Tax Planning ### Year-End Tax Planning: Key Strategies to Reduce Your Tax Burden As the calendar year draws to a close, many people find themselves rushing to wrap up their financial and tax affairs. While tax season typically brings to mind April 15, year-end tax planning can have a significant impact on the amount of taxes you owe and the deductions you can claim. By taking proactive steps now, you can make informed decisions that help reduce your taxable income and optimize your tax position before the year ends. Year-end tax planning is about reviewing your financial situation, making adjustments to minimize taxes, and taking advantage of opportunities that may not be available after December 31st. With careful planning, you can reduce your tax burden, boost your savings, and set yourself up for a more favorable financial future. #### 1. **Maximize Retirement Contributions** One of the most effective ways to reduce your taxable income before the year ends is by contributing to retirement accounts. Contributions to tax-deferred retirement accounts such as a 401(k)

2. or a Traditional IRA lower your taxable income for the year in which you make them. - **401(k):** For 2023, you can contribute up to $22,500 to your 401(k), or $30,000 if you're age 50 or older (with catch-up

3. contributions). If your employer offers a matching contribution, try to contribute at least enough to take full advantage of that match. - **IRA:** You can contribute up to $6,500 to a traditional IRA in 2023, or $7,500 if you're over 50. These contributions are typically deductible, reducing your taxable income for the year. If you’re self-employed, you may also be able to contribute to a SEP IRA or a Solo 401(k), which have higher contribution limits. Make sure to check the deadlines, as contributions to some accounts must be made by December 31st to count for the current year. #### 2. **Tax-Loss Harvesting** Tax-loss harvesting is a strategy that involves selling investments in your portfolio that have lost value in order to offset taxable gains from other investments. This strategy can be particularly useful if you have capital gains and want to lower the taxes you owe on them. For example, if you sold stocks or mutual funds during the year that generated capital gains, you can sell other investments at a loss to "harvest" those losses. The losses will offset your gains, potentially reducing your tax liability. If your losses exceed your gains, you can use the excess losses to offset up to $3,000 in ordinary income

4. ($1,500 for married individuals filing separately). Any remaining losses can be carried forward to future years. #### 3. **Consider Charitable Contributions** Charitable donations can help reduce your taxable income if you itemize deductions. Year-end giving to qualified charities allows you to take advantage of deductions in the current year. You don’t have to wait until the last minute to donate—giving before December 31st ensures that the deduction applies to this year's taxes. Consider donating appreciated assets, such as stocks or real estate, rather than cash. When you donate appreciated property, you can avoid paying capital gains tax on the increase in value, and you may be able to claim a deduction for the fair market value of the asset. If you’re over 70½, you can also make a Qualified Charitable Distribution (QCD) directly from your IRA to a charity, which can satisfy your Required Minimum Distribution (RMD) without increasing your taxable income.

5. #### 4. **Review Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)** If you participate in a Flexible Spending Account (FSA) or a Health Savings Account (HSA), you must use the funds by the end of the year or forfeit any unused balances (unless your employer offers a rollover option for FSAs). For FSAs, take stock of your medical expenses and schedule any necessary appointments or purchases before the year ends to fully utilize the funds in your account. If you have an HSA, remember that contributions are tax-deductible, and the funds grow tax-free when used for qualified medical expenses. You can contribute up to $3,850 for individual coverage or $7,750 for family coverage in 2023. #### 5. **Adjust Withholding or Estimated Payments** If your income has changed during the year, you may want to adjust your withholding on your W-4 or make estimated tax payments to avoid a large tax bill come April. This is particularly important if you received bonuses, sold investments, or had other significant changes to your income.

6. By reviewing your withholding and making adjustments before the year ends, you can either reduce your tax liability or avoid an underpayment penalty. #### 6. **Take Advantage of Tax Credits** Tax credits directly reduce the amount of tax you owe, which makes them more valuable than deductions. Review available credits before year-end to ensure you don’t miss any opportunities. Common tax credits include the Child Tax Credit, the Earned Income Tax Credit (EITC), and the American Opportunity Credit for education expenses. If you haven’t already, make sure to apply for these credits where applicable to reduce your total tax bill. #### Conclusion Year-end tax planning is a powerful tool that can help you save money, minimize your tax burden, and increase your financial security. By taking the time to review your financial situation, make strategic contributions, and use available deductions and credits, you can optimize your tax position and set yourself up for financial success in the year ahead. Working with a tax professional or

7. financial advisor can provide personalized guidance to ensure you’re making the best decisions for your unique situation.