By Lynn Evans
As 2024 draws to a close, now is the time to take a proactive approach to your financial and tax planning to maximize savings and align financial decisions with long-term goals. At Solidarity Wealth, we know that reducing tax exposure requires more than last-minute adjustments—it demands a thoughtful, forward-looking strategy. With a team of former tax and estate planning attorneys and experienced tax accountants, we offer in-depth, personalized guidance to help you make the most of your opportunities before the year ends.
Below, we highlight some of the most effective year-end tax strategies to consider and tailor to your unique financial situation. These proactive steps can help you minimize your tax liability, enhance your charitable impact, and position yourself for continued success in 2025.
1. Maximize 401(k) Contributions
Contributing to your 401(k) is one of the most effective ways to reduce taxable income while boosting retirement savings. For 2024, the annual contribution limit is $23,000, with an additional $7,500 available for those aged 50 and older. By adjusting your contributions in the final months of the year, you can make the most of this tax-advantaged account.
It’s important to check your year-to-date contributions to ensure you’re taking full advantage of this tax-deferred savings opportunity before the December 31 deadline.
2. Utilize Tax-Loss Harvesting to Offset Gains
If you’ve had capital gains in your portfolio this year, selling underperforming investments can help offset those gains—a process known as tax-loss harvesting. This strategy allows you to use losses to reduce taxable capital gains, and if your losses exceed your gains, up to $3,000 of excess losses can be applied to other income. Any remaining losses can be carried forward to future years.
For example, selling a stock at a $5,000 loss can offset $5,000 in capital gains elsewhere in your portfolio, potentially reducing your tax bill. However, it’s important to comply with the wash-sale rule, which prevents repurchasing the same or a substantially identical security within 30 days of the sale. This rule must be carefully followed to maintain the tax benefits of the loss.
3. Consider Qualified Charitable Distributions (QCDs)
For individuals aged 73 and older, a qualified charitable distribution offers a tax-efficient way to meet required minimum distribution (RMD) requirements. A QCD allows you to transfer funds directly from your IRA to a qualified charity, reducing taxable income while fulfilling the RMD obligation.
For example, donating $10,000 from your IRA to a charity satisfies the RMD requirement while avoiding taxes on the amount withdrawn. This approach may be beneficial if you’re already engaged in charitable giving and prefer not to increase your taxable income.
4. Establish a Donor-Advised Fund (DAF)
A donor-advised fund offers flexibility in charitable giving and tax planning. By contributing to a DAF, you receive an immediate tax deduction while distributing the funds to charities over time. This can be especially helpful if your itemized deductions are near the standard deduction threshold, as a larger contribution could allow you to claim additional deductions.
For example, making a sizable contribution to a DAF in 2024 may push your itemized deductions above the standard deduction, providing immediate tax benefits. You can then decide how and when to allocate the funds to the charities of your choice over the coming years.
A DAF is a practical tool for those seeking to balance philanthropic goals with tax-efficient planning.
5. Stay on Top of Your Required Minimum Distribution
If you’re 73 or older, you are required to take RMDs from most retirement accounts by December 31 each year. Failing to take the full RMD can result in a penalty of up to 25% of the undistributed amount. In the year you turn 73, the deadline for your first RMD is April 1 of the following year, but every year after that, the RMD must be taken by December 31.
For example, if your RMD is $15,000 and you fail to withdraw it, the penalty could be as high as $3,750. This underscores the importance of staying on top of your RMDs and considering ways to reduce the taxable impact, such as using QCDs to meet distribution requirements.
6. Evaluate the Benefits of a Roth IRA Conversion
Roth IRAs offer key advantages, including tax-free withdrawals in retirement and no RMDs. Converting a traditional IRA to a Roth IRA in 2024 could result in a higher tax bill this year, as you’ll be required to pay taxes on the converted amount, but future withdrawals will not be subject to income tax. This may be advantageous if you expect your tax rate to be higher in the future.
It’s essential to work with your advisor to carefully evaluate whether a Roth conversion fits into your broader retirement strategy.
7. Contribute to a 529 Plan
If you’re saving for a child’s or grandchild’s education, contributing to a 529 plan before the end of the year can offer valuable tax benefits. While contributions to a 529 plan aren’t deductible on your federal tax return, many states including Utah allow for deductions or credits on state income taxes for contributions made to in-state plans. Additionally, the funds in the 529 plan grow tax-free, and withdrawals used for qualified education expenses are also tax-free.
8. Maximize Contributions to Your Health Savings Account (HSA)
For individuals with a high-deductible health plan, contributing to a health savings account offers some tax advantages. HSAs provide triple tax benefits: contributions are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. In 2024, the contribution limit is $3,850 for individuals and $7,750 for families, with an additional $1,000 catch-up contribution for those aged 55 and older.
Even if you don’t use the funds immediately, they roll over from year to year, making HSAs a valuable tool for covering future healthcare costs, especially in retirement.
Maximizing your HSA contributions now can lower your taxable income for 2024 while building a tax-free reserve for future medical expenses.
Plan for a Financially Strong 2025
Taking the right steps in these final months of 2024 can have a meaningful impact on your tax situation and overall financial strategy. Whether you’re looking to reduce tax liabilities, maximize charitable giving, or strengthen your retirement plan, now is the time to act. At Solidarity Wealth, we are committed to helping you make informed decisions that align with your long-term goals.
If you’re ready to explore tax strategies you can implement before the end of the year, reach out to us at info@solidaritywealth.com or call 385-374-1665 to schedule a discovery call. We look forward to hearing from you!
About Lynn
Lynn Evans the Director of Family Office Services and a Tax Advisor at Solidarity Wealth, a privately held, independent wealth management firm that serves as a multi-family office to some of the Mountain West’s most successful families, technology entrepreneurs, and executives.
Lynn brings a wealth of experience to his role, advising families and individuals on complex individual, fiduciary, and business income tax matters, estate and gift tax planning, and fiduciary administration.
Prior to joining Solidarity Wealth, Lynn served as a Senior Trust Advisor at Wells Fargo Private Bank, where he helped successful clients identify their goals and worked closely with them to develop and implement comprehensive wealth strategies. Before his role at Wells Fargo, he worked as a senior tax manager for a large international CPA firm, specializing in complex tax issues for individuals, businesses, trusts, and estates.
Lynn holds a Bachelor of Arts in Accounting and a Master of Accountancy with an emphasis in tax from the University of Utah, as well as a Juris Doctor with a focus in Business Law and Estate Planning from Albany Law School. He is an active member of the Salt Lake Estate Planning Council and the American Bar Association, where he continues to engage with and contribute to the wealth management community. Outside of work, Lynn enjoys spending quality time with his wife and four children. A dedicated outdoorsman, he loves hiking, camping, and skiing, and is always eager to hone his home improvement skills or attend music performances and sporting events. To learn more about Lynn, connect with him on LinkedIn.
Solidarity Wealth is a registered investment adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Solidarity Wealth and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Solidarity Wealth unless a client service agreement is in place.
