Year-end action items to help you wrap up your 2024 finances

Review realized gains, dividends, and year-end distributions in your taxable accounts, and if applicable, take action to manage your taxes.

Ensure required minimum distributions (RMDs) are taken by year-end if over age 73, and consider making qualified charitable contributions (QCDs) to reduce taxable income.

Year-end is a helpful time to revisit your estate plan, portfolio asset allocation, employer plan savings rate, and tax withholding.

Be aware of year-end capital gains distributions: Mutual funds are often required to distribute capital gains (long term and/or short term) to investors at the end of the year. These distributions are expressed as dollars or cents per share. Preliminary estimates are typically available around late October and are paid in December.
 

• Note that these distributions will only trigger a tax liability in taxable accounts, not individual retirement accounts (IRAs) or other tax-deferred accounts.

• While you may want to avoid new investments in some mutual funds right before they distribute large gains, selling a fund ahead of the distribution may not result in lower taxes (due to the gain that may be realized through the sale of shares).

• Don't forget that your fund’s share price may drop on the day of the distribution. If your distributions are set to reinvest, your total investment in the fund won’t have changed, but you’ll have more shares and a higher total cost basis.

Complete any Roth IRA conversions by December 31: Converting a set dollar amount from a traditional IRA to a Roth IRA can provide tax-free growth and withdrawals in retirement, but it also triggers a taxable event in the year of conversion.
 

• If your income was lower than usual this year, or if you have other reasons to believe a conversion in this tax year could benefit you, be sure to consult with a financial advisor to weigh the pros and cons and plan to complete the conversion by December 31.

If tax-loss harvesting could help reduce your tax liability, sales must be executed by year-end: Some investors opt to sell all or a portion of taxable positions at a loss in order to offset capital gains realized on sales or distributions from other investments throughout the year.
 

• If your realized losses exceed realized gains, you can deduct up to $3,000 in capital losses from ordinary income, and any additional losses can be carried forward to future tax years. But if you intend to utilize tax-loss harvesting this year, those sales must occur by the end of the calendar year.

Maximize employee 401(k) and 403(b) contributions by year-end: The contribution limit for 2024 is $23,000 (or $30,500 for those age 50 and older, including catch-up contributions). Remember that the limit does not include employer matching contributions.
 

• If your goal is to maximize your contribution and you find that you’re behind, temporarily increasing your deferral percentage may help you reach that target before year-end. If those contributions are pretax, this boost can help to further reduce your taxable income for the year but will also result in lower net income over the holidays.

• If you’re unable or unlikely to reach the annual maximum before year-end, plan to adjust your deferral percentage to ensure that you are on track to max out your plan contributions next year. To calculate the necessary percentage, divide your contribution limit by the number of paychecks in a year. Then divide that amount by your gross pay per paycheck. Also, check with your plan provider to ensure that contributions will stop automatically once you reach the limit.

• Even if you aren’t in a position to max out your contributions, signing up for an auto-increase plan of 1% or more can help to ensure you’re gradually increasing your contributions.

Though not immediately required, you might consider making IRA contributions: You have until the tax filing deadline (April 15, 2025) to contribute to an IRA for 2024, but many investors opt to make their contributions before year-end—both to smooth out cash flows and potentially benefit from several more months of tax-advantaged growth. The annual limit for Traditional and Roth IRA contributions is $7,000 ($8,000 if you are over age 50).

Complete 529 contributions by December 31: 529 college savings plans offer tax-free growth and withdrawals for qualified educational expenses, and many states provide tax benefits for contributions, but typically, the deadline to receive a state tax deduction is December 31.
 

• If you want to make a larger contribution to a 529, you can “superfund” the account by contributing up to five years’ worth of gifts ($90,000 for individuals, $180,000 for couples) all at once, provided other gifts are not made to the beneficiary during that five-year period.

If you intend to gift up to the annual gift tax exclusion, do so by year-end: Some individuals have both the desire and the financial means to see their family members enjoy their inheritance while they’re still around (and reduce the size of their future taxable estate in the meantime). If you haven’t reached your annual gift tax exclusion amount and intend to, you might consider making your gifts before year-end.

Calculate and distribute your RMD: The amount of your RMD is based on the age you turned this year and your account balance as of December 31 of the previous year.
 

• If you turned 73 in 2024, you have until April 1, 2025, to take your first RMD. However, deferring your first RMD until 2025 will likely result in higher taxable income, since your second RMD will need to be taken by December 31, 2025. For this reason, retired investors who reach age 73 in 2024 may want to take their first RMD by December 31 to ensure that income is taxed in the present tax year.

Execute QCDs by December 31: If you are over the age of 70½, you can make up to $105,000, in 2024, in QCDs per year directly from your IRA to a qualifying charity.
 

• If you are over 70½, but not yet RMD age, QCDs can reduce the size of future RMDs, without increasing your taxable income. But if your other deductions bring you close to exceeding the standard deduction, QCDs cannot be itemized and therefore won’t help you exceed that threshold. So, if you’re close to itemizing, you may want to stick with cash gifts or transfers of securities from taxable accounts.

• Once you reach RMD age (age 73 in 2024), QCDs can count toward satisfying your RMD while excluding the amount from taxable income. Keep in mind that if your annual QCDs exceed your RMD for the year, you cannot count the overage against RMDs in subsequent tax years.

Make direct gifts of cash or securities transfers by year-end: For those who itemize deductions, charitable donations of cash or securities can be added to itemized deductions. If you’re planning to make charitable donations, ensure they are completed by December 31 to qualify for inclusion in itemized deductions for this year.

The end of the year is a crucial time for individual investors to take stock of their financial situation and make any necessary adjustments to maximize savings and minimize taxes. By addressing these year-end financial tasks, you’ll be better prepared for the upcoming year and can make the most of the available tax advantages—while ensuring your accounts are structured to meet your goals.

Consider working with an advisor or tax professional if your financial situation is complex.

Learn more about the T. Rowe Price Retirement Advisory Service.

Contact a Financial Consultant at 1-800-401-1819.