6 Tax Strategies to Maximize Your Year-End Savings

The end of the year can be a hectic time, and it’s tempting to put off tax planning to January or later. However, delaying could mean missing out on valuable opportunities to help reduce your tax bill.

Right now, there’s still time to review your plan, catch up on missed goals, and apply new tax-saving strategies. With that in mind, here are six steps to help you make this tax season more successful.

1. Maximizing Your Retirement Account Contributions

If you wish you had contributed more to your retirement accounts this year to reduce taxable income and boost savings, there’s still time.

While the deadline for contributing to 401(k) and similar employer plans is December 31, you have until April 15, 2025, to open or add to a traditional IRA or Roth IRA. Contributions to SEP and SIMPLE IRAs can also be made until April 15 for most businesses.

Now is also a great time to plan for next year and adjust your contributions. In 2025, the employee deferral limit for 401(k)s will increase to $23,500, with catch-up contributions for those 50+ rising to $7,500–$11,250. Refer to Octavia’s 2025 Retirement Plan Contribution Limits guide for detailed changes by account type and age.

2. Converting to a Roth IRA

There are income limits on who can contribute directly to a Roth IRA, but anyone can perform a Roth conversion by moving money from a traditional IRA or 401(k).

While you’ll have to pay income taxes on the funds you convert in 2024, there are several advantages, including:

• Tax-free growth on earnings
• No required minimum distributions
• Potential future tax savings due to currently low tax rates

A Roth conversion is straightforward, but there are important rules to understand, and pros and cons to consider. The clock is ticking: If you want to move funds in 2024, the conversion must be completed by December 31.

3. Contributing to a Health Savings Account (HSA)

Maximizing contributions to a health savings account (HSA) is another way to lower your taxable income each year. HSAs offer three key tax benefits:

• Growth within the account is tax-free, and you have investment options for your funds
• Contributions are tax-deductible, and the funds remain in the account until you use them
• Withdrawals for qualified medical expenses are tax-free at any age. After 65, unused funds can be withdrawn for any reason with ordinary taxes but no penalty, or used tax-free to pay for medical expenses.

For 2024, individuals with a qualified self-only high-deductible health plan can contribute up to $4,150, while those with family coverage can contribute up to $8,300. An additional $1,000 catch-up contribution is available for those 55 or older. You can open an HSA through your employer or an HSA provider, with contributions allowed until the tax deadline.

4. Offsetting Gains with Tax-Loss Harvesting

The end of the year is an ideal time to review your financial gains and losses for potential tax-loss harvesting. This strategy allows you to:

• Sell an underperforming investment at a loss
• Replace it with a similar (but not identical) investment to maintain your asset allocation
• Use the loss to offset investment gains and reduce your tax bill

To claim a loss on this year’s taxes, investments in taxable accounts must be sold by December 31 and reported on your tax return. With limited time left, consider whether tax-loss harvesting is right for you, and don’t hesitate to reach out to your Octavia wealth advisor for help.

5. Using a Donor Advised Fund for Tax-Efficient Gifting

If charitable giving is a priority for you, but the Tax Cuts and Jobs Act (TCJA) has made it difficult to deduct those donations, a donor advised fund (DAF) may offer a solution. Here’s how:

• With a DAF and a “bundling” strategy, you can combine several years of donations into one tax year and claim the charitable deduction that year
• The DAF’s sponsoring organization takes legal control of the donated assets (cash, securities, real estate, etc.), but you still have a say in how the fund is invested and can track its tax-free growth
• You can also have input regarding which qualified charities receive grants and when

To secure a tax deduction for this year, you must set up your DAF by December 31. You’ll have to act quickly if you want to research sponsoring organizations and decide which assets to donate.

6. Completing Your Required Minimum Distributions (RMDs)

Lastly, don’t forget about your required minimum distributions. If you were 73 or older in 2024, you must take required minimum distributions (RMDs) by December 31 from certain retirement accounts, such as traditional IRAs, rollover IRAs, and employer-sponsored plans. Any withdrawals from tax-deferred accounts will be treated as ordinary income on your tax return.

The RMD calculator on Investor.gov can assist in determining your required withdrawal this year. But if you have multiple accounts or an inherited IRA, things can get complicated.

The RMD rules and exceptions can vary by account type, and making a mistake can be costly. If you under-withdraw or miss the deadline (April 1, 2025, for first-time RMDs), it can result in penalties.

Ready to Maximize Your Tax Savings?

There’s a wide range of strategies that can help you reduce your taxes, hold onto more of your money, and reach your goals on your timeline. That’s why Octavia’s integrated tax planning approach is so effective. We look for tax-saving opportunities throughout your entire financial picture, at every stage of life. Schedule time now to meet with your Octavia wealth advisor to explore moves that can help you and your family plan for a confident future.