Financial Moves Military Members Should Make Before Year-End to Prep for Tax Season

As the end of the year approaches, military families and service members have unique opportunities to prepare for tax season, including some tax advantages specifically designed to support military life. By taking a few key steps, you can streamline the tax filing process, maximize potential savings, and ensure financial readiness for the new year. Here are six essential moves you may want to make before December 31 to set yourself up for a smooth tax season.

1. Maximize Contributions to Retirement and TSP Accounts

Military members often have access to both a traditional or Roth IRA and the Thrift Savings Plan (TSP), the government’s version of a 401(k). Contributing to these accounts not only secures your future but may also reduce your taxable income today. In 2024, you can contribute up to $22,500 to the TSP, or $30,000 if you’re over 50. This is also an excellent time to review whether a Roth or traditional TSP account is the best fit for your retirement plan. Roth contributions are after-tax, meaning withdrawals in retirement will be tax-free, while traditional contributions reduce your taxable income today. Learn more about Armed Forces Bank’s Money Market IRAs and CD IRAs that could be a great tax-deferred way to save at a guaranteed rate over time.

2. Adjust Withholdings Based on Deployment or PCS Changes

Military life comes with unique tax situations, especially if you've had a deployment, a Permanent Change of Station (PCS), or special pay this year. These events can change your tax liability significantly, so it’s wise to review your withholdings or estimated payments to ensure you won’t face an unexpected bill at tax time. If you’ve been deployed to a combat zone, you may qualify for tax-exempt income or special benefits, so consider consulting a tax advisor familiar with military tax benefits. You may also use Armed Forces Bank’s 1040 Tax Calculator to estimate your taxes for 2024.

3. Leverage Tax-Deferred Accounts Like Health Savings Accounts (HSAs)

If you’re on a high-deductible health plan, contributing to a Health Savings Account (HSA) can provide a tax-advantaged way to cover future medical expenses. In 2024, you can contribute up to $3,850 for individual coverage or $7,750 for family coverage, with an additional $1,000 catch-up contribution if you’re over 55. HSAs offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.

4. Plan for Year-End Charitable Donations

The military community is known for its generosity, and charitable giving can be a great way to support causes you care about while potentially reducing your taxable income. If you donate, remember to keep records of all contributions, whether cash or goods, to claim the deduction. Consider donating appreciated assets like stocks to maximize the tax benefit. Military banks often support charitable drives, so check if your base or financial institution has a way to contribute as part of a year-end drive.

5. Offset Gains with Tax-Loss Harvesting

If you’ve invested in stocks, mutual funds, or other assets, you may be able to use tax-loss harvesting to reduce your taxable capital gains. This strategy involves selling assets at a loss to offset any gains you may have realized during the year, potentially lowering your tax liability. If your losses exceed your gains, you can deduct up to $3,000 against your regular income, with any additional losses carrying forward to future years. Just remember the 30-day “wash sale” rule if you plan to reinvest in the same asset.

6. Gather and Organize Essential Tax Documents

Gathering essential tax documents now will save time and stress during tax season. Important documents include W-2s, 1099s, LES (Leave and Earnings Statements), bank and investment statements, and receipts for deductible expenses. Military-specific paperwork, such as PCS documentation or combat pay proof, should be included if relevant. Set up a secure place for all tax-related records and consider using a digital organizer for easy access. Many military banks also offer financial and tax assistance resources, so take advantage of these if available. Armed Forces Bank offers a Retirement Plan calculator that may help.

The Main Takeaway

Preparing now for tax season ensures that you won’t be scrambling at the last minute, and it may save you money on your 2024 taxes. By making retirement contributions, donating to charity, or organizing your financial paperwork, you’re not only taking care of immediate needs — you’re also securing a financially sound future. For any questions specific to military service members, your bank's financial advisors and tax specialists can provide support and guidance tailored to your unique circumstances.

To learn more about savings, taxes, and retirement planning, try Armed Forces Bank’s Financial Calculators.

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