As the year draws to a close, it’s a great time to meet with your wealth advisor and review strategies that can help maximize your savings while minimizing your taxable income. By making strategic moves before December 31, you can set yourself up for a strong financial future and start planning your goals for the upcoming year. Here are five key strategies to consider as you wrap up the year.

1. Maximize Your Retirement Contributions

If you’re contributing to an employer-sponsored retirement plan, like a 401(k) or 403(b), you have the opportunity to make significant contributions before the year ends. In 2024, you can contribute up to $23,000 to these plans, with an additional $7,500 catch-up contribution if you’re over 50, bringing your total to $30,500 for the year. Keep in mind that employer matching contributions do not count toward the limit, and total contributions (employee and employer) are capped at $69,000 in 2024 ($76,500 with catch-up).

If you’re contributing to an IRA, you have until the April 15 tax filing deadline in 2025 to make contributions. The contribution limit for traditional and Roth IRAs is $7,000 for those under 50, and $8,000 for those 50 or older.

2. Convert a Traditional IRA to a Roth IRA

Converting a portion of your traditional IRA to a Roth IRA before year-end could be a smart move, depending on your personal situation. While the conversion is taxable in the year it’s made, the assets will grow tax-free in the Roth, and qualified withdrawals will also be tax-exempt. Plus, Roth IRAs don’t have required minimum distribution (RMD) rules, which can give you more flexibility in managing your retirement funds.

To avoid diminishing your retirement savings, consider paying the tax on the conversion from other sources instead of using IRA funds. This ensures your investments remain intact and continue to grow.

3. Donate to Charitable Causes

Charitable contributions can reduce your taxable income, but it’s important to evaluate whether it’s worth itemizing deductions or if you should take the standard deduction. For 2024, single filers can claim a standard deduction of $14,600 ($15,000 in 2025), while joint filers have a $29,200 deduction ($30,000 in 2025).

One effective strategy is “bunching” your charitable donations—making larger contributions in one year to exceed the standard deduction limit and maximize your tax benefits. Donor-advised funds (DAFs) are a great tool for this, offering an immediate tax deduction while allowing you to decide later which charity will receive the donation.

Additionally, if you are 70½ or older, you can make tax-free charitable donations directly from your IRA, up to $105,000 annually.

4. Gift Monetary Assets

Gifting money to family members before the year ends is another way to reduce your taxable estate. For 2024, you can gift up to $18,000 ($19,000 in 2025) to an individual without using up any of your lifetime gift tax exemption. This exemption is $13.61 million for individuals in 2024, increasing to $13.99 million in 2025.

If you want to help a child or grandchild with education costs, consider contributing to a 529 plan. Contributions to these plans are subject to the $18,000 annual gift limit ($19,000 in 2025), but you can front-load five years’ worth of gifts, allowing up to $90,000 in 2024 ($95,000 in 2025).

5. Harvest Investment Tax Losses

Tax-loss harvesting is a strategy that involves selling investments that have declined in value to offset taxable capital gains. If your losses exceed your gains, you can deduct up to $3,000 of the excess losses against other income, and any remaining losses can be carried forward to future years.

Just be cautious of the IRS’s wash-sale rule: if you purchase the same or “substantially identical” security within 30 days of selling it, the loss will be disallowed.

Conclusion

As the year ends, taking proactive steps to manage your taxes and boost your savings can provide lasting benefits. Whether you’re maximizing retirement contributions, making charitable donations, or planning for future gifts, these strategies can help reduce your taxable income and put you in a strong position for the coming year. Work closely with your wealth advisor to ensure you’re making the most of these opportunities before the year ends.