Investment, tax tips for keeping, growing your money in 2024

It’s almost time to say goodbye to 2023. But don’t let some time-sensitive tax and other money tips slip away without pondering and perhaps acting on a few.

These tips involve portfolio reviews, charitable donations, stock sales, retirement planning and more.

Review and rebalance your investments

The investment landscape this year has been much different from 2022. Hence, it’s a good idea to check what you own because things likely shifted around a lot.

Rebalancing is the process of adjusting your portfolio periodically so that you maintain your desired or target mix of stocks, bonds or other assets. Suppose you strive to hold 60% of your investments in stocks and stock funds a nd the other 40% in bonds and bond funds. If your mix is now closer to 70/30 following this year's stock market rally, it might be time to sell some equities and move the proceeds to the bond side.

Rebalancing provides a discipline for buying low and selling high. From a tax perspective, it’s often neater to do so within sheltered accounts such as 401(k) plans and individual retirement accounts (IRAs). Otherwise, you would incur taxable transactions with each trade.

If you want to hold more fixed-income investments, consider Series-I U.S. Savings Bonds, suggests Trent White, a certified financial planner and attorney in Scottsdale, Arizona. These investments pay yields (currently 5.27%) that are pegged to inflation, which has made them popular lately, he said. You buy them from the government (at Treasurydirect.gov), which places a general limit of $10,000 in annual purchases per person.

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Donate to charities

Giving away money or property can be a good way to reduce your taxes, but many caveats apply and the strategy doesn’t make sense for everyone. For starters, you must itemize to make tax-deductible charitable donations, but most Americans take the standard deduction instead. "Fewer people benefit from charitable giving (from a tax perspective) because the standard deduction is so high," said White.

Charitable donations also are limited — generally, you can deduct no more than 60% of your adjusted gross income. You also may deduct various types of property donations such as vehicles or furnishings, but you might need to have larger gifts appraised. Still, donating appreciated assets or investments can make sense to avoid the capital-gains taxes that otherwise might apply.

If you can't give away the several thousand dollars a year or more that might be necessary to make itemizing worthwhile, it can pay to “bunch” your donations by skipping them one year and doubling up the next.

Gifts to individuals can’t be deducted. However, anyone may give up to $17,000 each year to any number of other people (or up to $34,000 given by married couples) without incurring gift-tax consequences, White noted.

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Harvest those losses or gains

If you sell money-losing stocks, funds or other investments, you can use that to offset gains on more profitable holdings. If your losses exceed you gains, you can deduct some of the excess, up to $3,000 per year, carrying forward unused amounts to future years. This tax-loss harvesting approach can be used on investments held in unsheltered accounts but not in 401(k) plans, IRAs and so on.

You may harvest losses throughout the year but it’s popular to do so in December, when you know which holdings are sitting on gains or losses. One caveat: You can’t purchase the exact same security within 30 days before or after a sale. If you do, your deduction would be disallowed under the "wash sale" rule, though you may buy similar but not identical investments within that time.

Another caveat is that you must first offset short- or long-term losses against gains of the same type, where “long term” signifies investments held for more than one year.

“But if your losses of one type exceed your gains of the same type, then you can apply the excess to the other type,” noted Fidelity Investments in a commentary. “For example, if you were to sell a long-term investment at a $15,000 loss but had only $5,000 in long-term gains for the year, you could apply the remaining $10,000 excess to offset any short-term gains.”

Alternatively, if you're in a low ordinary-income tax bracket, especially if it's temporary, you might consider capital gain harvesting instead, White suggests. The idea here is to look for opportunities where you can sell appreciated investments at the lowest 0% long-term rate. Singles with taxable income up to $44,625 can qualify for that, as can married couples filing jointly up to $89,250.

Plan for required minimum distributions

If you have been investing diligently in 401(k) plans, IRAs and other tax-deferred accounts, congratulations, but a tax bill awaits. Required minimum distributions are taxable withdrawals that you generally must take out on an annual basis, starting at age 73. Still, there are ways to minimize the tax bite.

One option is to take some withdrawals before you hit RMD age, pay the tax, then convert the proceeds into Roth IRAs for tax-free growth later, with no more RMDs to deal with. Another option is to make qualified charitable distributions. With these, available to people 70½ and up, you may donate up to $100,000 annually from a traditional IRA directly to charities and exclude the withdrawn amount from taxation. It's an option if you’re charitably inclined and can live off other income. This option is open to people 70 1/2 and up, even though RMDs don't kick in until 73, White noted.

At any rate, the time to start planning an RMD strategy is years before you must take them. But planning is advisable, as ordinary withdrawals from tax-sheltered accounts can bump up your Medicare premiums and make more of your Social Security income taxable.

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