End-of-Year Tax Planning: Strategies to Maximize Your Savings

As the year winds down, it's crucial to start thinking about your tax planning for the upcoming year.

Financial expert Kristin Afelumo with Her Planning shared her insights on the steps you should be taking now to prepare for the tax season.

Tax Planning Season is Here

"This is tax planning season, officially, and even I will be reaching out to my tax accountant, maybe this afternoon, and saying, 'Hey, what are my taxes look like? What am I going to owe by the end of the year? And should I put some money aside in tax-deductible accounts so I can defer paying some taxes till later, or not at all,'" Afelumo said.

Maximizing Retirement Contributions

Afelumo emphasized the importance of maxing out retirement plan contributions, not just the employer-matched amounts.

"So this year, you can contribute $7,000 to an IRA if you're under 50. Add another $1,000 to that if you're catching up making catch-up contributions. You can also contribute 23,000 Yes, two or 401. K, if you're a business owner, even more so."

Utilizing Donor-Advised Funds for Charitable Giving

One strategy Afelumo recommended is using a donor-advised fund for charitable contributions.

"A donor advice fund gives you the opportunity to put money into an investment account for a future charitable contribution. You still get to retain the ability to manage the investments, and you still get to decide where the money goes, but you get to write it off in your taxes for this year," Afelumo said.

Super-Funding 529 Plans for Education Savings

For parents and grandparents, Afelumo highlighted the benefits of super-funding 529 plans.

"If they have a large chunk of money in their estate and they're looking to give a gift to the grandkids, they can super fund a 529 plan, which means you can make up to five years of a gift to your 529 plan for your grandchild now," Afelumo said.

By starting your tax planning now, you can take advantage of various strategies to maximize your savings and prepare for the upcoming year. Remember to stay informed and consult with your financial advisor to ensure you're making the most of your end-of-year financial decisions.