As end of year approaches, financial experts urge you to review your accounts

Michael Perchick Image
Tuesday, December 26, 2023
Now is the time to think about your finances; money pros explain why
While filing season isn't until April, the end of the year is an important deadline for both tax and savings purposes.

RALEIGH, N.C. (WTVD) -- While filing season isn't until April, the end of the year is an important deadline for both tax and savings purposes.

"You can reduce your taxable income by up to $3,000 of losses. So let's say you bought a stock for $10,000 at the beginning of the year, it's now worth $7,000. You can sell that now before the year ends and reduce your taxable income by $3,000," said Gray Pendleton, president of Pendleton Financial.

2023 has been a strong bounce-back year for the stock market, with the Dow, S&P 500, and Nasdaq all seeing solid returns.

If possible, Pendleton encourages those in an employer-sponsored 401K account to increase their contribution during this final payroll cycle, while scheduling out contributions evenly in 2024.

"If you match unevenly, if you max out earlier in the year or midway through the year, you're actually not getting the full benefit of the match. And most corporate 401K plans won't go back and true you up," Pendleton said.

The maximum amount you can contribute to a 401K will increase from $22,500 in 2023 to $23,000 in 2024.

As for asset holdings, you should be cognizant of tax responsibilities based on how long you've owned a respective stock.

"If you have the option to hold it just a little bit longer to take it from a short-term capital gain to a long-term capital gain, there's going to be a tremendous positive tax benefit associated with that. For the richest taxpayer paying taxes at a 37% tax rate, that would bring the tax liability from 37% down to 20%," said Nathan Goldman, an Associate Professor of Accounting at NC State's Poole College of Management.

Stocks can also be used for charitable purposes, with individuals able to capitalize off gains.

"You can also donate those stocks. And what it does is it allows you to get the donation basis based on what you donated at, what the fair market value is at today. Meanwhile, your cost basis remains at that lower amount," Goldman said.

"You're able to make a charitable contribution directly from your IRA to a charity, and then you don't have to realize that income," added Pendleton.

While each individual's financial situation is different, those who work on commission or independently can opt to schedule payments for early January instead of late December to push their earnings to the following year.

"If you're a small business owner and you have the ability to make a big sale (Dec. 29) or the New Year, it may benefit you to wait until the new year to make that big sale. You still get the cash flow right around the same time. However, you're delaying your tax liability to a future period, a period where you can pay it down the road. With time value of money, that makes it a lot more valuable," Goldman noted.

As inflation reports show price drops, the Federal Reserve could ultimately decide to adjust its rates.

"If the Federal Reserve lowers their interest rate, you'll start seeing the interest rate you're getting paid on those cash deposits go down as well. It might be a good idea to lock in some higher rates for a little bit longer," said Pendleton, noting a CD is one such option.

People can make contributions to HSA and IRA accounts until April 15 and have until March 15 to use the remaining money in their FSA.

"Look at your budget. Not many people make a budget, but it could be freeing to do so, just to (look at) here's what's coming in, here's what I expect to go out. That's a very good thing to do at the beginning of the year," said Pendleton.

You can reach out directly to your employer or insurer to confirm you are fully using your respective accounts.