Taxes are done (unless you are on extension ), and you may be thinking you don’t need to think about them again for quite a while. On the contrary, now is the perfect time to start preparing for your 2024 tax return.

With some intentional planning, you can set yourself up for better tax efficiency for this calendar year. So, while you may not be very motivated to dive back into a tax mindset, you won’t want to neglect these four things you can be doing right now that can keep more money in your pocket.

1. Max out your company-sponsored retirement program

If the first step in investing for your future is contributing to your company’s 401k plan, step 2 is maxing it out. If you want to build long-term wealth and increase your chances of reaching financial independence earlier, contributing the max to your 401k ($23,000 in 2024 + $7,500 catch-up if you are over 50 years old) is a great way to start.

If you can’t max out, then consider raising your contribution level by 1% or 2% with the goal of doing that once a year. If you received a raise this past year, consider living off the same monthly income you were and increasing your retirement contributions with your new funds.

I know 20% seems very high for most, but saving this level of your income will supercharge your asset growth.

2. Adjust Your Withholding

Did you wind up with a large tax refund or owe a lot in taxes last year (+/- $5,000)? Then hopefully your accountant advised you to adjust your withholding to prevent this. I know most financial advisors recommend that you don’t overpay your taxes because that means you are essentially providing the government with a free loan. However, for some, it can serve as a forced savings discipline whereby the lump sum you receive back at the end of the year can be saved or invested.

Regardless of your approach, now is the time to print off your most recent paystub and check with your accountant or financial advisor to see if you are on track, whatever your tax strategy may be. When it comes to your taxes, we want to avoid any surprises that could put you in a cash crunch.

3. Review Your After-Tax Investments

If you have after-tax investments, they most likely produce income that can add to your tax bill. Take a look at that projected income and consider the timing of selling assets to manage your capital gains and losses strategically for the upcoming year. Remember, long-term capital gains are typically taxed at lower rates than ordinary income, so holding onto investments for more than a year before selling them may result in tax savings. Be mindful of tax-loss harvesting opportunities to maximize your tax benefits while staying aligned with your investment strategy.

4. Evaluate Your Charitable Donations

While the IRS incentivizes generosity by offering tax deductions for your charitable contributions, the increase in the standard deduction can sometimes nullify the benefit that these used to provide.

To maximize tax savings, you might consider bunching charitable contributions into a single tax year by making donations for multiple years in advance within that year. For example, if someone typically donates $10,000 to charities annually, they could instead contribute $20,000 in a single tax year, effectively doubling their charitable contributions for that year. By doing so, they may surpass the standard deduction threshold, making it more advantageous to itemize deductions on their tax return.

By addressing these four tax items now, you will set yourself up to be even more tax efficient come tax season next year.

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network. They can be reached by phone at the Corning, NY office at (607) 438-2914, Ithaca, NY office at (607) 463-8400, or Portland, OR office at (607) 292-2172 or at the firm’s website at https://lakeroadadvisors.com/

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.