Five Year-End Strategies You Can't Afford to Miss

"2024" is on one end of a balanced seesaw, and a piggy bank is on the other.

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If you’re waiting until the Christmas tree comes down to gather your paperwork for the tax-filing season, you could be missing out on some critical deadlines.

Some tax filers wait until the last minute to hand their paperwork to their accountant. But dragging your feet this year could be risky because of a big CPA shortage problem. According to the American Institute of CPAs (AICPA), the number of accountants entering the profession is at historic lows, with just over 67,000 candidates sitting for the CPA exam in 2022 — down from roughly 72,000 the year prior and significantly below the forecast of 74,000. In fact, the number of students sitting for the CPA exam in 2022 was the lowest in 17 years.

That means overworked accountants may not be able to be able to provide thorough counsel as the tax-filing deadline approaches. Additionally, CPAs are focused on filing your returns, not giving you investment advice (even if it pertains to taxes), so it’s up to the do-it-yourselfer to stay informed and on top of those details.

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When it comes to your investment portfolio, consider these five strategic moves:

1. Allocate investments strategically (asset location)

For the 61% of American adults who own stocks and other investments, it’s crucial to assess how your investment income — including dividends, income from bonds and interest from savings accounts — affects your tax obligations. Investors can help to lower their taxable income by allocating investments based on their tax impact. For example, to help you minimize taxes now and maximize your investment growth, consider placing assets that generate ordinary income — like corporate bonds — into tax-advantaged accounts, such as IRAs or 401(k)s. Likewise, think about placing tax-advantaged income from municipal bonds into taxable accounts.

2. Perform Roth conversions

Year end is an ideal time to consider Roth conversions, a strategy that shifts funds from a pre-tax account, such as a traditional IRA, to an after-tax Roth account. Now that you have a holistic view on income earned for the year, you can determine whether converting assets from an IRA into a Roth IRA pushes you into a new tax bracket or not. This strategy can help reduce your lifetime tax burden by allowing you to pay taxes now, potentially at a lower rate, and benefit from tax-free growth in the future, boosting long-term wealth.

Roth conversions aren’t just for low-income earners; they can be particularly advantageous for high-income individuals, too. For instance, if you’re currently in a high tax bracket, but anticipate moving to an even higher tax rate in the future, converting now at a lower tax rate can help avoid higher taxes down the road. Or, high-income earners can consider a backdoor Roth conversion.

3. Take losses

Despite the current bull market, consider taking advantage of tax-loss harvesting. Even if an asset is currently at a gain overall, individual portions, or “lots” within that asset, could still be at a loss. By selling those specific losses, you can offset gains elsewhere in your portfolio and reduce your taxable income.

Tax-loss harvesting isn’t just a year-end strategy — it's an ongoing opportunity, especially during market fluctuations. By regularly reviewing your holdings, you can uncover valuable opportunities to lower your tax liability, regardless of overall market performance.

4. Maximize employer benefit plans

Take a moment to review your employer benefit plans to ensure you’re taking full advantage. These plans often include options like traditional or Roth 401(k)s (sometimes with employer matching contributions), health savings accounts (HSAs) or flexible spending accounts (FSAs). Many of these offer valuable tax benefits. Retirement plans usually allow you to make additional contributions at the end of year to reach the maximums. If you can’t change your HSA or FSA elections for this year, set reminders in the new year to help you remember to meet your minimums.

5. Make a gift

Donating cash or stock to qualified charities can reduce your taxable income. Also, if you can give to family members, consider taking advantage of the annual gift tax exclusion for 2024 of $18,000 ($36,000 for couples) to transfer assets tax-free before the end of the year.

Everyone knows the adage about death and taxes. Though it may be tempting to put off doing your taxes for as long as humanly possible, the truth is that procrastination will likely cost you.

If you want to ensure that you’re taking advantage of every opportunity to decrease your tax liabilities, don’t delay. Start thinking about what your entire financial picture looks like so that you can take steps to set yourself up for success when April rolls around.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Sevasti Balafas is the CEO and Founder of GoalVest Advisory, a New York City-based wealth management firm with over $700 million of assets under management. With over 20 years of experience in the financial services industry, she is a seasoned wealth advisor specializing in creating tailored portfolios for high-net-worth individuals. Ms. Balafas is passionate about financial empowerment, offering sophisticated investment strategies and personalized solutions that allow her clients to reach their financial potential.