One of the most popular New Year resolutions is to gain better control over your finances. It’s a great goal; however, knowing where to start can be challenging and overwhelming, especially if you have a more complex financial situation.
This is where the services of a Birmingham, AL financial advisor like BCR Wealth Strategies can be a game-changer in your ability to pursue your New Year’s resolution to take more control over your financial life while ensuring you aren’t incurring excess expenses like paying more taxes than you should. Each new year has new regulations, limits, deadlines, and opportunities that can impact your financial well-being.
Did you know that even small adjustments you make now can impact your financial well-being when tax season rolls around again? At BCR Wealth Strategies, our team of Birmingham, AL, financial advisors can help you confidently head into the new year prepared for your tax situation.
Whether you’re fine-tuning your retirement plan contributions, organizing important documents for your prior year’s return, or looking for ways to optimize charitable giving, having a plan in place now will make everything work smoother now and in the future.
Below are some important investment strategies and tax tips you can adopt for the new year:
1. Review the Year’s Contribution Limits and Maximize Your Savings
One of the first and most impactful steps you can take early in the year is reviewing the contributions to tax-advantaged accounts. Whether you’re setting money aside in a 401(k), IRA, Health Savings Account (HSA), or another type of plan, these limits can change yearly.
Following are some of the more important retirement account contributions limits for 2025:
- 401(k), 403(b), and Thrift Savings Plan:
- Employee Contribution Limit: $23,500, up from $23,000 in 2024 (2.2%)
- Catch-Up Contributions (Age 50+): An additional $7,500, totaling $31,000
- Special Catch-Up Contributions (Ages 60-63): Starting in 2025, individuals aged 60 to 63 can contribute an extra $11,250, bringing the total to $34,750
- Individual Retirement Accounts (IRAs):
- Contribution Limit: Remains at $7,000
- Catch-Up Contributions (Age 50+): An additional $1,000, totaling $8,000
- SIMPLE Retirement Accounts:
- Contribution Limit: Increased to $16,500 from $16,000 in 2024
- Catch-Up Contributions (Age 50+): An additional $3,500 for $20,000
- Special Catch-Up Contributions (Ages 60-63): Eligible for an extra $5,250, allowing a total of $21,750
- Health Savings Accounts (HSAs):
- Individual Coverage Contribution Limit: $4,300, up from $4,150 in 2024
- Family Coverage Contribution Limit: $8,550, up from $8,300 in 2024
- Catch-Up Contributions (Age 55+): An additional $1,000
- Income Phase-Out Ranges:
- Traditional IRA Deductible Contributions:
- Single Filers Covered by Workplace Plan: $79,000 to $89,000
- Traditional IRA Deductible Contributions:
- Married Couples Filing Jointly (Spouse Covered): $126,000 to $146,000Roth IRA Contributions:
- Single Filers and Heads of Household: $150,000 to $165,000
- Married Couples Filing Jointly: $236,000 to $246,000
Watch our video on tax-smart investing tactics.
2. Start Collecting Tax Documents for Last Year’s Return
While it may feel too early to consider filing last year’s taxes, getting organized now will pay off. Make a checklist of all the documents you expect to need for your tax return, such as:
- W-2 forms from your employer
- 1099 forms for any freelance or side gig income
- Investment statements, including gains, losses, and dividends
- Mortgage interest statements (Form 1098)
- Records of any charitable donations
- Business expense records if you’re self-employed
- Records related to rental income, if applicable
Having a comprehensive list for referencing as documents arrive in January and February will help you track what you currently have and what’s missing. If you know certain documents are harder to obtain—like year-end statements from investment accounts held elsewhere or K-1 forms from partnerships—start that retrieval process sooner rather than later.
3. Plan Your Deductions and Tax Strategies Early
Effective tax planning requires foresight, not just last-minute, knee-jerk reactions. Start by reviewing your projected income for the upcoming year and any changes in your life—such as a new job, marriage, child, or large purchase—that might affect your tax situation.
By planning deductions and strategies early in the year, you avoid the end-of-year rush, ensuring a more efficient tax outcome with a clear, actionable plan during the year.
- Itemized vs. Standard Deductions: If you usually take the standard deduction, evaluate if itemizing could save you more this year, especially with significant expenses like medical bills or mortgage interest. Keep track of these from the start.
- Tax-Efficient Investing: Optimize your investment strategy for tax benefits, such as placing assets in tax-advantaged accounts or using tax-loss harvesting. Consult a financial advisor to align your investments with your tax situation.
- Roth Conversions and Advanced Strategies: Early in the year, assess if a Roth IRA conversion or similar strategy could be beneficial, providing the time you need to make a thoughtful decision.
Are you looking for ways to give back while gaining a tax break? Watch our video on enhancing your charitable giving.
4. Be Intentional with Charitable Giving
Charitable contributions can be a meaningful way to support causes you care about while receiving personal tax benefits. However, it’s best not to make quick decisions. Think strategically about how, when, and what you give to ensure it aligns with your philanthropic and personal financial goals.
- Donating Appreciated Stock: Give appreciated securities to charities to avoid capital gains tax and claim a deduction for the full market value.
- Bunching Charitable Contributions: Combine donations into one year to exceed the standard deduction and benefit from itemizing.
- Donor-Advised Funds (DAFs): Contribute to a DAF now for an immediate deduction, then distribute to charities later for flexibility and more tax benefits.
Check our personal finance blog posts and videos for more complex situations.
5. Be Aware of Changes to Tax Laws and Limits
Tax laws change, and contribution limits, deduction thresholds, and credits can shift from one year to the next. Even if you’ve set yourself up for success in January, it’s wise to be aware of what possible tax changes will occur in the current and future years.
Consider working with a Birmingham financial advisor who can assist you with pivoting as needed, ensuring your investment and tax strategies are always current and optimized. Sometimes, a small tweak—like altering your monthly 401(k) contribution or adjusting withholding—can keep you on track.
6. Work with BCR Wealth Strategies: Birmingham, AL Financial Advisors
At BCR Wealth Strategies, our mission is simple: we’re dedicated to your financial independence. As the CEO of your finances, you hire us as your Chief Financial Officer (CFO). We provide tools, resources, and advice, but you remain the final decision-maker.
Here are some of the reasons why people choose us to manage their wealth:
- You want to delegate the daily management of your wealth to focus on what’s truly important in your life.
- You may be navigating life’s transitions like marriage, children, widowhood, divorce, or retirement.
- You want a wealth management firm that offers personalized solutions, not generic ones, to help you pursue your financial goals.
- You’re looking for a Birmingham financial advisor who provides high personal communications and services.
Our Plan to Succeed™ program offers customized financial solutions that simplify decision-making and empower you to secure your financial future.
Your success comes from knowing your strengths and outsourcing where necessary. When your family’s finances suffer from a lack of time or interest, BCR Wealth is here to help. We understand that success is unique, and we tailor our financial planning and investment strategies accordingly.
Connect with us today to learn more about our tax planning services.
