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Published on: 11/09/2023

Your End-of-Year Tax Planning Checklist

Constructing and reviewing your end-of-year tax planning checklist are critical pieces of managing your finances as a high-net-worth individual. Active tax planning offers an opportunity to take steps to reduce your tax liability and maximize your take home, as well as an opportunity to make sure you stay in compliance with complex and changing tax laws. Despite the numerous benefits, many people don’t take advantage of the opportunity to do basic end-of-year tax planning and end up paying more in taxes than necessary.

With the year coming to an end, it is essential to review your financial situation and plan accordingly for any potential tax implications. In that spirit, we’re here to offer some general year-end tax strategies that high-net-worth individuals might want to consider implementing before the new year. 

*Keep in mind that tax laws and regulations change often, so it’s essential to consult with a tax professional or financial advisor for advice tailored to your specific situation. 

Review your income and deductions

  • Estimate your total annual income including salary, bonuses, investments, and other income sources you may have.
  • Consider making extra payments towards expenses on your tax deduction checklist, such as mortgage interest or charitable contributions.

Keep reading: Does Texas have a state income tax?

Maximize retirement contributions

  • Contribute the maximum allowed amount to your retirement accounts, such as a 401(k), IRA, or Roth IRA.
  • Catch up on contributions if you’re age 50 or older.
  • As part of your retirement tax planning, and if it is available under your qualified retirement plan, utilize after-tax contributions and Roth conversion avenues to capture added tax benefits for your savings.

Capital gains and losses

  • Review your investment portfolio and consider realizing capital losses to offset capital gains.
  • Understand the tax implications of short-term and long-term capital gains.

Charitable giving

  • Make charitable contributions to qualified organizations to reduce your taxable income.
  • Consider donating appreciated securities to avoid capital gains and Medicare taxes as part of your year-end tax planning.
  • If you are at least age 70 ½, you can make a Qualified Charitable Donation from your taxable retirement accounts.

Tax-efficient investments

  • Invest new money in tax-efficient funds or holdings to minimize the impact of taxes on your investments.
  • Research your existing funds to identify if they are tax-inefficient by having high capital distributions or dividends.

Health savings account (HSA)

  • Contribute to your HSA if you have a high-deductible health plan (HDHP).
  • Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses are tax-free.

Flexible spending accounts (FSAs)

  • If you have an FSA, use any remaining funds before the year-end deadline.

Rollover or convert retirement accounts

  • Consider rolling over or converting traditional IRAs to Roth IRAs; however, be aware of the tax consequences as part of your year-end financial planning checklist.

Check for tax credits

  • Review available tax credits, such as the Child Tax Credit, Earned Income Tax Credit, or education-related credits.

Required minimum distributions (RMDs)

  • If you’re of the required age (typically 72), make sure to take your RMDs from retirement accounts before the end of the year.

Estate planning

  • Review and update your estate plan, including wills, trusts, and beneficiaries.
  • Exemptions for estate, gift, and inheritance tax in Texas change, so stay informed about the current limits.
  • If you intend to gift using your exemption, be sure to do so before the end of the year.

College funding

  • Consider contributing to a 529 plan for your child’s education expenses.
  • Are 529 contributions tax deductible? Contributions are tax-deductible up to certain limits, and withdrawals for qualified educational expenses are tax-free.

What do I need at the end of the year for taxes?

Throughout the year, aim to keep track of all your financial records, including income statements, investment statements, and any relevant tax documents such as W-2s or 1099 forms. Additionally, make sure to keep receipts or proof of charitable contributions, medical expenses, and other deductible items.

These records can help you (or more likely your accountants) accurately report your income and deductions when it comes time to file taxes.

Streamline your tax planning with the help of Avidian Wealth Solutions

Making the effort to review your finances and plan for year-end taxes can have significant impacts on your overall financial well-being. By taking advantage of deductions, credits, and tax-efficient strategies before the end of the year, you can potentially reduce your tax burden and keep more money in your pocket.

Remember, your end-of-year tax planning checklist should be tailored to your specific financial situation and goals. To identify the solutions that will work for you, work with a financial planner from Avidian Wealth Solutions to create a plan that works to optimize the impact of your income.

Avidian offers a boutique family office experience that includes high-income tax strategies and tax planning services in Houston, Austin, Sugar Land, and The Woodlands. If you’re looking for a personalized tax preparation list, schedule a conversation with the financial advisors at Avidian today. 

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