As we ring in the new year, tax season quickly follows. While filing your return can feel like just another item on your to-do list, we consider tax time a valuable opportunity to take control of your finances and set yourself up for long-term success. Whether you’re prepping your documents or reviewing your return, these strategies can help you make the most of your finances, before and after tax season.
What to Do Before Tax Season: Prepare and Optimize
- Organize Early: Gathering your tax documents early ensures a smoother filing process and minimizes stress. Keep track of W-2s, 1099s, receipts for deductions, and any relevant investment or retirement account statements. A well-organized approach reduces the chance of missed opportunities.
- Max Out Contributions: If you haven’t hit the limit for your IRA or HSA contributions for the prior year, you typically have until the 2024 tax filing deadline, April 15, to make them count. This is a simple yet powerful way to reduce taxable income while boosting your savings.
- Review Tax Law Changes: Each year brings changes to tax laws that might affect your situation. We will work with you to identify new opportunities or potential risks for deductions and credits based on what may have changed in the tax code.
- Evaluate Potential Deductions: If you're self-employed or a small business owner, ensure you're accounting for deductible expenses like home office costs, vehicle mileage, or health insurance premiums. Thoughtful planning now can help save money later.
Moves to Make After Tax Season: Learn and Plan
Once your tax return is filed, it’s not the end—rather, we like to think of it as the beginning of a smarter financial future based on your outcome. You may not realize it, but your tax return is a treasure trove of information that can help guide your financial strategy, and as CPAs and financial advisors, tax returns are some of the best ways to gain insights into our client’s financial pictures.
- Understand Your Income and Expenses: Review your return for a clear breakdown of your income sources and spending patterns. Are there areas to cut back or diversify? Did your income bracket change? If you received a large refund, consider adjusting your withholdings for 2025 so you can make more of your money work for you throughout the year, either through investing or saving for retirement.
- Set Goals Based on Your Return: A significant tax refund can be a great boost for savings, investments, or debt repayment. There are always options for a lump sum of money, such as investment accounts that can be tailored to short-, medium-, or long-term goals. Alternatively, if you owed taxes, it may be time to reassess your budget or estimated payments for the year ahead if you would rather not owe down the line.
- Review Retirement Savings: Tax returns reveal whether you contribute enough to retirement accounts. Use this insight to set realistic goals for increasing your retirement savings. Consider discussing tax-efficient strategies like Roth conversions or maximizing employer matches with a financial advisor.
- Leverage Investment Strategies: Your tax return shows dividends, capital gains, and losses, which can inform your investment strategy. Are you taking advantage of tax-loss harvesting? Should you rebalance your portfolio to better align with your goals and minimize tax impact? We can help with all these considerations as you navigate the rest of 2025 and beyond.
- Estate Planning Considerations: For some, tax season may reveal that it’s time to offload some funds to reduce your tax liability. There are a number of ways to do this in a tax-efficient manner, such as charitable contributions, gifting to family, real estate investing, and other uses that reduce your taxable income.
- Risk Management: Your tax return may have included changes in dependents, marital status, or a shift in income sources. These changes can highlight the need to review or update life and long-term care insurance policies to ensure you and your loved ones are financially secure. By partnering with an advisor who can use your tax return as a financial roadmap, you can proactively address potential gaps in coverage and create a more comprehensive protection strategy for the future.
- Plan for the Year Ahead: Use this moment to schedule quarterly check-ins with your financial advisor. Regularly revisiting your tax and financial plans helps ensure that you’re staying on track as circumstances change.
Bringing It All Together
Maximizing your finances is a year-round effort, and tax season offers a unique opportunity to reassess your financial health. Combining your tax return insights with proactive planning allows you to make smarter financial decisions, save on taxes, and work toward your long-term goals.
As an advisory firm with both CPAs and financial advisors, we specialize in helping clients connect the dots between taxes and financial planning. Let's chat if you’re ready to take your finances to the next level. Together, we can create a personalized strategy for success.