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6 year-end money deadlines to know

Key takeaways

  • Year-end is your last chance to get some of these financial tasks completed so they can be included in tax year 2023.
  • Some planning tasks have a hard stop at the end of December in order for the tax impact to be included with 2023 taxes. They include spending Flexible Spending Account (FSA) funds, completing a Roth conversion, contributing to a 401(k), contributing to charity, taking an RMD if you are of a certain age, and harvesting tax losses.

2024 is around the corner and that means there's not much time to wrap up your financial to-do list for the year. Here are 6 money moves to consider making so you can enjoy your holidays and set your finances up well for the new year.

1. Money left in your FSA may be lost if not used by year-end

A forgotten FSA can feel like a windfall—but don't let it slide too long because you may lose the money if it's not spent by the end of the year.

There are 3 different types of FSAs: health care FSA, limited purpose FSA that is compatible with a health savings account (HSA), and the dependent care FSA.

Some employers allow a portion of the amount saved to be rolled over for the next year. But in general, savers must spend their FSA funds before the end of the year or else the money is lost.

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2. Are you considering a Roth conversion?

The end of the year is the deadline for completing a Roth conversion for the 2023 tax year. The last business day of 2023 is December 29.

If you've been thinking about converting, it may make sense to consider getting it done now, especially if your retirement account balances are down. That's because the tax bill created by converting to a Roth is based on the amount converted. With stock prices down, the same number of shares may be converted for less money than it would have cost last year.

Tip: Roth conversions can be done in kind, in other words you can often transfer assets from a traditional IRA to a Roth IRA without selling. You do still owe tax on the conversion.

3. Make sure you've contributed to tax-advantaged accounts

Some account types like IRAs and HSAs allow contributions for the past year until the tax-filing deadline in April. However, for HSAs, waiting until April may mean making a contribution outside of payroll deductions, potentially incurring FICA taxes that could have otherwise been avoided if the contribution had been made by the last business day of the previous year. Other types of retirement accounts like 401(k)s have clear deadlines at the end of the year.

In 2023, you can contribute up to $22,500, or $30,000 if you're over age 50, to a 401(k). For the 2024 tax year, you can contribute up to $23,000, or $30,500 if you're over age 50.

Tip: If you get a year-end bonus, you may be able to direct some of it into your workplace retirement plan.

If you're also saving for education, keep those deadlines in mind too. Some states' 529 plan accounts have a year-end deadline in order to get state tax breaks.

4. Could charitable contributions lower your tax bill this year?

If you itemize your taxes, you can deduct charitable donations to qualified organizations from your taxes. In general, you can deduct up to 60% of your adjusted gross income (AGI) for cash donations, per IRS rules. For donations of appreciated securities, you may be able to deduct 30% of your AGI.

To make sure you're able to get the deduction for your 2023 taxes, contributions must be made in 2023. Donating cryptocurrency or restricted stock can require more planning than donating cash so be sure to investigate specific deadlines ahead of time. Further rules may apply based on the charity you are donating to, any elections you make, and your personal tax situation.

If you don't itemize your taxes you may be able to get a deduction with a strategy called bunching. That means concentrating deductions in a single year, then skipping one or even several years of future donations. This strategy can work well when your total itemized deductions for a single year fall below the standard deduction: Charitable contributions for several years made at once may allow the total of itemized deductions to exceed the standard deduction, making it possible to obtain a tax deduction for at least part of the charitable contributions. The catch is that this strategy requires having the financial capacity to pack more than a year's worth of your donations into a single year.

5. Remember RMDs if you are 73 or older

A required minimum distribution (RMD) refers to mandatory withdrawals from qualified retirement plans like traditional IRAs that kick in once a saver reaches age 73. Your first RMD deadline is April 1 in the year after you turn 73. All subsequent RMDs must be taken by December 29. Missing those deadlines can be costly with a 50% penalty on withdrawals not taken.

Note that if you delay your first RMD until April, you'll have to take 2 RMDs your first year—and pay taxes on them. The first will still have to be taken by April 1; the second, by December 31.

6. Think about harvesting investment losses

Tax-loss harvesting allows you to sell investments that are down, replace them with reasonably similar investments, and then offset other realized capital gains with those losses. The end result is that less of your money goes to taxes and more may stay invested and working for you.

An investment loss can be used for 2 different things:

  • The losses can be used to offset investment gains
  • The losses can offset up to $3,000 of ordinary income annually on a joint tax return

Unused losses can be carried forward to future tax years.

In order to put investment losses to good use, you'll need to harvest your losses before December 29.

It's never too late to start planning

If you don't make this year's deadline for some of the things you hoped to accomplish, you may have a chance to do it next year. If you need help getting started, consider talking to a tax advisor and financial professional to find out if any of these moves or other planning steps could benefit your bottom line.

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This information is intended to be educational and is not tailored to the investment needs of any specific investor.

The change in the RMDs age requirement from 72 to 73 applies only to individuals who turn 72 on or after January 1, 2023. After you reach age 73, the IRS generally requires you to withdraw an RMD annually from your tax-advantaged retirement accounts (excluding Roth IRAs, and Roth accounts in employer retirement plan accounts starting in 2024). Please speak with your tax advisor regarding the impact of this change on future RMDs.

Recently enacted legislation made a number of changes to the rules regarding defined contribution, defined benefit, and/or individual retirement plans and 529 plans. Information herein may refer to or be based on certain rules in effect prior to this legislation and current rules may differ. As always, before making any decisions about your retirement planning or withdrawals, you should consult with your personal tax advisor.

Fidelity does not provide legal or tax advice, and the information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation.

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