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Tax Savings and Charitable Giving to Close Out the Year

Tax Savings and Charitable Giving to Close Out the Year

December 13, 2023

As the holidays quickly approach and we prepare to put 2023 in the rearview mirror, now’s a good time to consider some charitable giving and other ways you can optimize your finances and tax savings. The following financial moves are all well worth considering…


Boost Your Retirement Contributions

If possible, be sure to contribute the highest annual amount allowed to your retirement plan…  

If your employer offers a group retirement plan such as a 401k, you should of course contribute to it, especially if your employer matches or partially matches the amount you put in. You can make sure youre taking full advantage by contributing the maximum allowable annual amount of $22,500. If you’re over 50, you can add an extra $6,500 in catch-up contributions. Any matching contributions your employer might make don’t count toward these amounts.

If your job doesn’t offer a 401k or other retirement plan, you hopefully have a personal plan. The traditional IRA is the most common type, and you can contribute up to $6,500 annually for 2023, or $7,500 if you’re over 50.


Convert to a Roth IRA

Certain tax advantages may make it worth your while to move money out of your 401k or traditional IRA and into a Roth IRA. While the money you put into a Roth IRA is taxed initially and can’t be deducted from your taxable income, it offers one heck of a sweet deal: all investment earnings are tax-free. But you have to play by the rules and refrain from withdrawing your investment returns early. When you reach age 59 ½ and your account has been open for at least five years, you can take make tax-free withdrawals.


Take Your Required Minimum Distributions… or Not

Once you've hit age 72 (or 73 if you reached 72 after Dec. 31, 2022) you have to deal with required minimum distributions (RMD). These are the minimum amounts you have to withdraw from your retirement accounts each year. If you don’t withdraw enough, you will be penalized 50% of the amount you neglected to withdraw.

Feeling philanthropic? If youd like to avoid paying taxes on your RMD you can simply give it away. To satisfy your RMD in this way, you must transfer the money directly from your IRA to a qualified charity. Doing this ensures your RMD is not included in your adjusted gross income. Keep in mind, if you choose to receive your RMD first and then give it to charity, the gift will be included in your adjusted gross income and will need to be deducted from your adjusted gross income (assuming you itemize).


Lower Your Tax Bracket

There are a few things you can do now, before Jan. 1, that can spruce up your tax situation now or in the coming year…

  • Reduce your tax burden with tax-loss harvesting—offsetting your capital gains with capital losses. You simply sell funds and stocks that have lost value to offset taxes on the profits of stocks and funds that have gained in value.
  • Make your January mortgage payment before the year ends.
  • Use your credit card for any charitable donations. That way, even though you won’t actually pay off the charges until next year, you’ll get the tax deductions this

Give Money to Charities

When given to qualified organizations, donations of both money and goods are fair game to deduct on your income taxes, thus reducing your taxable income. These donations:

  • Must be designated by the IRS as a 501(c)(3) organization.
  • Usually can’t exceed 60% of your adjusted gross income.


CONTACT US to speak with an experienced financial advisor today. We can help you plan for the future you want.