Now that most of us have filed our tax returns, it can be very tempting to move on. But that return is more than a historical document — it’s a detailed snapshot of your financial life, and when reviewed thoughtfully, it can act as a powerful planning tool.
However, the majority of Americans miss this opportunity. According to a study by the American Institute of CPAs, only 27% of individuals use their tax return to inform or adjust their financial plan each year.
This article is written by CPA Jennifer T. Stephenson, who is also the chief planning officer at SignatureFD, where she is involved in all levels of servicing clients’ financial planning needs.
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That means nearly three-quarters of taxpayers overlook a uniquely comprehensive source of insight that could help optimize their long-term financial strategy.
With the right lens, your 2024 tax return can reveal where your investment strategy may be generating unnecessary tax exposure, opportunities to better manage cash flow and the potential to fine-tune your charitable and savings strategies.
Here are a few key areas to consider:
1. Assess investment tax efficiency
Your tax return can offer a wealth of insight into how your investments are impacting your overall tax liability.
- Capital gains and losses. If you sold investments during the year, your return will reflect realized gains or losses. This information is essential when considering strategies such as tax-loss harvesting, which can help offset future gains, or when thinking about rebalancing out of highly concentrated positions.
- Interest and dividend income. Form 1040 and Schedule B (Interest and Ordinary Dividends) detail the income generated by your accounts. If your taxable accounts are generating high levels of non-qualified dividends or interest, it may be worthwhile to revisit how your assets are allocated across taxable and tax-advantaged accounts.
- Maximize tax-advantaged account contributions. If you’re not yet maxing out your contributions to a 401(k), health savings account (HSA) or individual retirement account (IRA) on an annual basis, your return can help identify room for increased savings. In some cases, a Roth IRA or Roth 401(k) may be appropriate, particularly for those in lower tax brackets or earlier in their careers.
- Review asset location strategy. Your return can also help clarify whether the right assets are held in the right types of accounts. Income-generating assets, for instance, are often best placed in tax-deferred or tax-exempt vehicles, while tax-efficient investments can typically be held in taxable accounts to help minimize your overall tax burden.
2. Optimize giving and medical expense strategies
Your deductions also serve as an opportunity to be more strategic with charitable giving and health care planning.
- Charitable contribution planning. If you typically give to charitable organizations but do not itemize deductions, you may benefit from bunching multiple years of contributions into a single tax year. Donor-advised funds (DAFs) and gifts of appreciated securities can further enhance both tax efficiency and philanthropic impact.
- Medical expense timing. If your qualified medical expenses approach the deductibility threshold — 7.5% of adjusted gross income — consider consolidating planned procedures or care costs into a single tax year to maximize their potential deductibility.
3. Refine cash flow and withholding management
Beyond deductions and investment income, your tax return offers valuable insights into your cash flow management. Understanding your options is especially important in times of economic uncertainty.
- Evaluate withholding and estimated payments. An unexpected balance due or an overly large refund may indicate that your withholding or estimated tax payments are out of sync with your actual income. Adjusting now can help avoid surprises — and penalties — when you file your 2025 return.
- Reinvest surplus income strategically. If you’re receiving dividend or interest income that you do not rely on for living expenses, reinvesting that income can help build wealth over time. This approach supports dollar-cost averaging, a strategy that can reduce the impact of market volatility while building your portfolio for the long term.
4. Begin planning for next year now
Your recent tax return offers a clear view of where you were financially in 2024. Leveraging it thoughtfully allows you to chart a more intentional course forward.
For example, if you’re able, consider frontloading contributions to accounts like IRAs or 529 plans early in the year. This allows your investments more time to grow and helps you take full advantage of tax benefits.
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You can use this moment to meet with your financial planner. Together, you can work to ensure your investment and tax strategies are working in harmony — and that your financial plan is evolving alongside your life and your goals.
We believe tax planning should never be a once-a-year exercise. When integrated into your broader financial strategy, it can become an engine for long-term growth and greater peace of mind.
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