As the year winds down, now is the perfect time to check off those financial to-dos. Here are 8 key money moves (plus a bonus tax hack to boost your credit card points) to consider making so you can head into the new year with less stress and set yourself up for financial success in 2025.
1. Use It or Lose It: Check Your FSA
If you have a Flexible Spending Account (FSA), be sure to spend any remaining funds before the end of the year to avoid losing them. FSAs typically come in three types: health care, limited-purpose (compatible with HSAs), and dependent care.
Some plans allow a small portion to roll over or offer a grace period into early 2025, but most require you to use the funds by December 31. Check with your employer to confirm your deadlines and eligible expenses, like medical co-pays, prescriptions, or child care.
2. Consider a Roth Conversion
If you’ve been debating converting a traditional IRA to a Roth IRA, now is the time to act. The deadline for a 2024 Roth conversion is December 31.
Why consider it now? If your retirement account balances are down, the tax bill on the conversion will also be lower, as it’s based on the value converted. You can transfer assets “in kind,” meaning no need to sell investments before converting, but you will owe taxes on the amount converted.
3. Maximize Contributions to Tax-Advantaged Accounts
Ensure you’re contributing as much as possible to accounts like 401(k)s, IRAs, and HSAs.
- 401(k): For 2024, the contribution limit is $23,000, or $30,500 if you’re age 50 or older. The deadline for 401(k) contributions is December 31.
- IRAs/HSAs: While contributions for 2024 can be made until the April 2025 tax filing deadline, HSA contributions made by December 31 through payroll deductions can avoid FICA taxes.
Pro tip: Use a year-end bonus to boost your retirement contributions or education savings in 529 plans, which may offer state tax benefits if funded by year-end.
4. Optimize Charitable Giving for Tax Savings
If you itemize deductions, consider making charitable donations by December 31 to reduce your 2024 tax bill.
- Cash Donations: Deduct up to 60% of your adjusted gross income (AGI).
- Appreciated Securities: Deduct up to 30% of your AGI and avoid paying capital gains taxes.
If you don’t normally itemize, try “bunching” donations. This strategy involves making several years’ worth of contributions at once to exceed the standard deduction in 2024. Donor-advised funds can help streamline this approach.
5. Don’t Forget RMDs if You’re 73 or Older
If you’re 73 or older, Required Minimum Distributions (RMDs) from traditional IRAs and certain retirement accounts are mandatory.
- First RMD: Must be taken by April 1 the year after turning 73.
- Subsequent RMDs: Must be taken by December 31 annually.
Avoid missing the deadline—there’s a 25% penalty for missed RMDs, though this can be reduced if corrections are made quickly.
6. Take Advantage of Tax-Loss Harvesting
Use tax-loss harvesting to sell investments at a loss to offset taxable capital gains.
- Offset realized capital gains dollar-for-dollar.
- Deduct up to $3,000 of investment losses against ordinary income ($1,500 if married filing separately).
- Carry forward unused losses to future tax years.
Make sure you complete any loss-harvesting transactions by December 31 to apply them to your 2024 taxes.
7. Review Your Tax Withholding
If you’ve had significant changes in income, withholding adjustments may help avoid surprises come tax season. Use the IRS Tax Withholding Estimator to check if you need to fine-tune your withholding for 2025.
8. Plan for End-of-Year Expenses
Take stock of holiday expenses, travel, or any big-ticket items to avoid overspending. If you’re expecting a year-end bonus, create a plan for allocating it toward financial goals like debt repayment, savings, or investments.
Bonus Tax Hack to Get More Credit Card Points (from my friend Colin Stroud, Go Somewhere)
How I Earned 99,000 Chase Points from Paying My Taxes
This is what I call a next-level money move.
Here’s the situation: My wife needed a business credit card, and we also had a tax bill to pay. After some quick strategizing, we came up with a plan to turn this expense into a major points haul.
She applied for the Chase Ink Unlimited card, which has no annual fee and was offering a sign-up bonus of 90,000 points after spending $6,000 in the first 3 months. This card also earns 1.5% back on all purchases—including tax payments.
By using this card to pay $6,000 in taxes, we hit the spending requirement and earned:
- 90,000 points for the sign-up bonus
- 9,000 points from the 1.5% rewards on the $6,000 spent
That’s a total of 99,000 Chase points in one go.
Wait—You Can Pay Taxes with a Credit Card?
Yes, you can. The IRS allows credit card payments through third-party processors. The catch? There’s a small fee.
For this payment, we used a processor charging a 1.82% fee, which came out to $109 on a $6,000 tax bill.
Is It Worth It?
Absolutely. Here’s why:
- For $109 in fees, we earned 99,000 points.
- Those points can be redeemed for $4,000+ in travel when used strategically through Chase Ultimate Rewards (e.g., transferring to airline or hotel partners).
That’s a 36x return on the fee we paid.
Why You Should Consider This Hack?
If you have a tax bill (or any other large expense) and a great credit card offer, this is a fantastic way to maximize rewards. The key is ensuring:
- The processing fee is small compared to the value of the points.
- You can pay off the card balance in full to avoid interest charges.
So, why aren’t you doing this? It’s a simple and effective way to turn an unavoidable expense into major travel rewards!
If you don’t check everything off your list this year, don’t stress—you can still take steps in 2025 to improve your finances (there’s several April 15, 2025 deadlines for 2024 like Roth IRA contributions). However, acting now can help you enter the new year feeling confident and prepared. But act quickly.
For personalized advice, consult a financial or tax advisor to see how these strategies (and others) could improve your financial outlook. I know a few who can hook you up. I can even hook you up with a complimentary financial or tax assessment. Email me: lynnt@herretirement.com or go to: https://herretirement.com/talk-to-a-retirementor