3 Smart Tax Moves to Make Before the End of 2023

There are just over two months left in 2023, and it's a good time to start thinking about the tax return that you'll file in 2024. Although we're almost through 10 months of the tax year, you might be surprised at how many moves you can make before the end of the year that could lower your tax bill significantly. Here are three that could potentially save you thousands of dollars.

1. Increase your 401(k) contributions

If you save for retirement through a traditional or Roth IRA, you have until the April 2024 tax deadline to make your 2023 contributions. But when it comes to your 401(k) or similar retirement plan at work, you have to get them in by the end of the year.

So, if you can do it, it could be a smart idea to increase your retirement plan contributions for the last couple months of the year. The IRS allows elective deferrals of as much as $22,500 into qualified retirement plans, or $30,000 if you're age 50 or older. And while you might not be able to contribute quite that much, the point is that for some people, there's plenty of room for a year-end boost.

Not only will your 401(k) contributions reduce your taxable income, but you'll be setting yourself up for a more comfortable retirement.

2. Pay your mortgage early

Well, your January payment at least. This could be a nice year-end tax hack if you itemize deductions.

It's well-known that the IRS allows a deduction for mortgage interest on as much as $750,000 in qualified mortgage debt. But what you might not realize is that you can deduct all of the interest you pay in a given year, not just what was billed.

Here's why that is important: Let's say that your mortgage payment is $2,000 per month, and roughly 50% of it is interest. You make all 12 of your monthly mortgage payments throughout the year, resulting in $12,000 in deductible interest. But what if you choose to make your January mortgage payment before Dec. 31? Now you have an additional $1,000 in mortgage interest to deduct this year.

3. Boost your charitable giving

Charitable contributions are one of the most common itemized deductions and must be completed on or before Dec. 31 to count on your 2023 taxes.

One tip is that you don't necessarily have to donate money, so if you don't have as much cash available as you'd like, you may still be able to take advantage. You can donate clothing to an organization like Salvation Army, or you can donate your kids' toys they've outgrown and get a deduction for a reasonable value of these items.

A particularly tax-efficient way to give is to donate stock that has gone up in value significantly since you bought it. You get to take a tax deduction for the full market value of the donated shares, but you don't have to pay any capital gains tax as you would if you had sold them and donated cash.

You could have quite an impact on your tax bill

With just these three strategies, many people could make a large impact on their tax bill. For example, let's say that you make an extra mortgage payment with $1,000 of interest, donate $2,000 worth of appreciated stock, and contribute $2,000 extra to your 401(k). If you're in the 24% tax bracket, these moves could save you $1,200 on your federal tax bill. And that doesn't consider any state tax savings or the capital gains tax you can avoid.

Of course, all three of these won't apply to everyone. But even if one or two of them do, you might be surprised at how much of an impact you can have on your 2023 taxes with just over two months left in the year.