Final Countdown: 7 Tax-Planning Strategies for Year-End

Help clients plan for a variety of potentially significant tax-saving opportunities before it’s too late.

By Keith K. Grissom
Keith Grissom
Keith Grissom

As the end of the year quickly approaches, a number of planning opportunities, while commonly used, are easy to forget. Many of these opportunities, if used and timed wisely, can provide your clients with potentially significant tax savings come next Tax Day. Other items need to be done before year-end to avoid penalties.

Here are seven strategies for making the most of tax planning before year-end:

Bunching charitable contributions

Many taxpayers are finding their deductible expenses will be less than the 2023 standard deduction. However, for those with a consistent charitable-giving plan, the charitable deduction could provide a planning opportunity.

For example, assume that a married couple annually gives $30,000 to charitable causes and has no other deductible expenses. In 2023, they would itemize because their total deductions ($30,000) exceed the standard deduction of $27,700 by $2,300. Assuming that their charitable giving remains the same for four years and the standard deduction remains below $30,000, their total deductions during the four-year period would be $120,000.

Instead, let’s suppose that over the same four-year period the couple “bunches” their deductions by giving $60,000 to charitable causes in years one and three. This results in total deductions for each of those two years being $60,000. In years two and four, no charitable contributions are made, resulting in the couple taking the $27,700 standard deduction. At the end of the four-year period, the couple will now have utilized $175,400 of deductions. (The IRS recently announced a higher 2024 standard deduction of $29,200 so total deductions would be higher.)

As a result of the couple bunching their charitable deductions instead of continuing to give the same amount each year, they will likely reduce their overall tax liability for the four-year period. A variation of this strategy could be for the couple to instead front-load a donor-advised fund (DAF) but still maintain annual giving to the charities from the DAF.

Loss harvesting

Now may be a good time to consider recognizing losses to offset other gains for the year. However, it is important to remember the wash-sale rule. Under this rule, losses may not be recognized if the same or substantially identical securities are purchased 30 days prior to or following the date of the sale.

Maxing-out retirement contributions

Clients should maximize retirement contributions before year-end. For 2023, the contribution limit for employees under 50 who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $22,500. In addition, individuals age 50 and over can make a catch-up contribution of $7,500. The contribution limit for 2024 is increased to $23,000.

The 2023 limit on annual contributions to traditional and Roth IRAs is $6,500 for those under age 50, and $7,500 for those 50 and older. Contributions to Roth IRAs and the deductibility of contributions to traditional IRAs are subject to income phase-out.

For 2024, the traditional and Roth IRA contribution limit will increase to $7,000 for those under age 50, and $8,000 for those 50 and older.

Withdrawing RMDs

Generally, retirement-plan-account owners must take their first annual required minimum distributions (RMDs) by April 1 of the year after they turn age 73. (The age was 72 if they turned that age before Dec. 31, 2022.) After the first withdrawal, owners must take annual RMDs by Dec. 31 of each year. However, with that initial RMD, an account owner can choose to take it in the year he or she turns 73 instead of waiting until April 1 of the following year. That choice would mean the income from the first and second RMDs would be included in separate tax years.

RMDs are not required from Roth IRAs until after the death of the account owner. Designated Roth accounts in a 401(k) or 403(b) plan, however, are subject to the RMD rules for 2023. But for 2024 and beyond, RMDs are no longer required from these designated Roth accounts during the owner’s life.

If an owner does not withdraw their RMDs annually, they may face stiff penalties. Previously, an owner would be subject to a penalty of 50% of the RMD amount not taken. However, Secure Act 2.0 reduced that penalty to 25%, or as low as 10% if the RMD mistake is corrected within two years.

With inherited accounts, the timing for taking RMDs will vary depending on the date of death of the account owner and the characteristics of the beneficiary.

If the account owner died on or after Jan. 1, 2020, distributions to most non-spouse beneficiaries must be distributed within 10 years after the owner’s death. In addition to surviving spouses, other kinds of beneficiaries are not subject to the 10-year rule, including a child who has not reached the age of majority, a disabled or chronically ill individual, and a person who is not more than 10 years younger than the account owner. These beneficiaries may be able to take RMDs over their life expectancy. After a minor child has reached the age of majority, he or she must follow the 10-year rule.

Roth conversions

Because the amount converted from a traditional IRA to a Roth IRA is taxed as ordinary income, clients with ordinary losses may find it beneficial to do a conversion this year. A down market can also make a conversion more appealing, as can a year in which the client has made large charitable contributions.

Also, current law will result in tax-rate increases in 2026, so there may be an incentive to convert and pay taxes now so the assets grow tax-free in a potentially higher-tax-rate environment. However, before converting any accounts, it is important to consider whether the increased income from the conversion could have any unintended consequences, like triggering higher Medicare premiums.

Using FSA funds

Employees with a flexible spending account (FSA) may want to consider using the funds before year-end unless their employer offers a grace period. Some employers may instead offer a rollover into 2024 of up to $610.

For employees who will be retiring, it is important to plan accordingly. The retiring employee may be reimbursed from the FSA only for eligible expenses incurred before the date of their retirement unless COBRA coverage is elected. Any funds remaining in the account following the date of retirement or when COBRA coverage ends will be forfeited back to the employer.

Making annual exclusion gifts

In 2023, individuals may gift up to $17,000 to any number of individuals or qualifying trusts without incurring a gift tax or using their lifetime exemption. Married couples can currently gift up to $34,000 per donee, gift-tax-free.

For those who have considered making gifts to friends and family, year-end is a great time to make such gifts. Clients may also consider making another set of annual exclusion gifts early in the new year. The gift-tax exclusion for 2024 is increasing to $18,000 per donee. These gifts are a tax efficient way to reduce the donor’s taxable estate.

As we enter the final countdown to year-end, it is important for clients to evaluate the planning opportunities available to reduce their tax bill next year and take care of those items required to be done before the ball drops.

Keith Grissom, a partner at Armstrong Teasdale LLP, focuses his practice on tax and estate planning, closely held business succession planning and asset protection. He counsels both businesses and individuals on tax matters including addressing income, estate, gift and generation-skipping transfer tax issues related to estate planning and trust administration. He can be reached at



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