Maximizing Tax Benefits: Top Five Financial Moves Before Year-End

SAN ANGELO, Texas – As the calendar inches closer to the new year, individuals and households are strategizing their financial moves to optimize tax benefits before December draws to a close. With a focus on charitable donations and mortgage adjustments, experts recommend five key actions to consider before the year-end deadline.

1. Leverage Charitable Contributions

Maximizing charitable donations by contributing to eligible organizations can yield significant tax benefits. Those inclined to give back can benefit by donating cash, appreciated stocks, or even household items to qualified charities. It's crucial to ensure that contributions are made to registered nonprofit organizations to claim deductions. Additionally, consider accelerating planned donations into this tax year to reap immediate benefits.

2. Utilize Donor-Advised Funds (DAFs)

Establishing or contributing to a Donor-Advised Fund (DAF) before the year ends allows donors to receive immediate tax deductions while maintaining the flexibility to distribute the funds to chosen charities over time. DAFs offer a tax-efficient strategy for consolidating charitable giving, enabling donors to claim deductions in the year contributions are made.

3. Optimize Mortgage Interest Payments

For homeowners with mortgages, prepaying January's mortgage installment before December 31st allows them to claim the interest paid as a deduction for the current tax year. By accelerating this payment, individuals can enhance their itemized deductions and potentially reduce taxable income for the year.

4. Consider Refinancing or Adjusting Mortgage Terms

Assessing mortgage terms and considering refinancing can also impact tax planning. Refinancing to secure a lower interest rate or adjusting mortgage terms before year-end may lead to decreased monthly payments and potentially reduced tax liabilities, especially for those itemizing deductions.

5. Maximize Retirement Contributions

Contributing the maximum allowable amount to retirement accounts, such as Traditional IRAs or 401(k)s, can significantly reduce taxable income. For those below age thresholds, contributing to Roth IRAs might also offer tax advantages. Individuals should explore and take advantage of employer-sponsored retirement plans and consider increasing contributions to reap tax benefits before the year concludes.

Experts emphasize consulting tax advisors or financial planners to ensure compliance with tax laws and to tailor strategies to individual financial situations.

As the year-end approaches, these strategic financial moves provide opportunities to maximize tax benefits, enhance deductions, and potentially lower tax liabilities. Taking proactive steps in December can pave the way for a more tax-efficient and financially savvy start to the upcoming year.