Tax Planning Tips to Optimize Your Returns

As the year draws to a close, now is the perfect time to make strategic decisions that can positively impact your 2025 tax return. Though the window for tax-saving moves is narrowing, there's still an opportunity to implement smart strategies that could enhance your return.

Everyone's financial situation is unique, and when it comes to tax planning, a one-size-fits-all approach won't work. However, there are several common practices that can typically lead to favorable results on your tax return. Below are some key tips to consider:

Maximize Retirement Contributions

Contributing to tax-deferred retirement accounts, such as a 401(k) or IRA, can reduce your taxable income for the year. If you haven't maxed out your contributions yet, doing so before the end of the year could significantly lower your tax liability. The limits for these contributions can vary, so make sure you're aware of the maximum amount allowed.

Take Advantage of Charitable Donations

Donating to qualified charities is not only a generous way to give back but also a powerful tool for reducing your taxable income. You can deduct charitable contributions if you itemize your deductions, and in some cases, even non-cash donations like clothes or household items can be claimed. Be sure to keep proper documentation to support your claims.

Harvest Investment Losses

If you've had some losing investments this year, consider selling them to offset gains from other investments. This process, known as tax-loss harvesting, allows you to use your investment losses to reduce your taxable gains, thereby lowering your overall tax bill. Even if your losses exceed your gains, you may be able to deduct up to $3,000 of the excess against other types of income.

Review Flexible Spending Accounts (FSAs)

If you have a Flexible Spending Account (FSA) for healthcare or dependent care expenses, check to see if you have any unused funds. Most FSAs operate under a "use it or lose it" rule, which means that if you don't spend the money by the end of the year (or in some cases, by the grace period in the following year), you forfeit it. Make sure to spend those funds on eligible expenses before the deadline.

Prepay Deductible Expenses

If you anticipate a significant tax bill, consider prepaying certain deductible expenses, such as mortgage interest or property taxes. This can provide an additional tax deduction in the current year, potentially lowering your overall tax burden.

Final Thoughts

Effective tax planning doesn't need to be complex, but it does require some forethought. By taking advantage of these strategies before year-end, you can optimize your tax return and ensure that you're making the most of your financial situation. Hilary Walker, Southside Bank East Texas Regional President of Wealth Management & Trust says, "Good tax planning is a critical part of managing and preserving wealth. The support of a qualified wealth and trust officer is also helpful when considering these different strategies and tips."

The information provided in this article is for general informational purposes only and should not be construed as financial advice. Before making any financial decisions, it is strongly recommended that you consult with a certified financial advisor or another trusted financial professional to assess your individual circumstances. For tax-planning tips specific to your unique financial situation, we'd recommend meeting with our Wealth Management and Trust team. Learn more and schedule a meeting at southside.com/wealth/wealth-management-and-trust.

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