Year-End Tax Planning

As the year winds down, smart taxpayers look ahead. Year-end tax planning isn’t just about scrambling to lower your bill at the last minute. It’s about using every tool available to set yourself up for a healthier financial future. Whether you’re an individual, a freelancer, or a small business owner, a few strategic moves can put more money in your pocket and reduce the stress of tax season.

1. Maximize retirement contributions

One of the most effective ways to trim your tax liability is to contribute to tax-advantaged retirement accounts. If you have a 401(k), try to contribute up to the annual limit. For 2025, that’s $23,000 if you’re under 50, and $30,500 if you’re 50 or older. If you have a traditional IRA, you can contribute up to $7,000 (or $8,000 if you’re over 50), reducing your taxable income. Even contributions made up until the tax filing deadline can count for this year, but starting before December 31 spreads the load.

2. Review your portfolio for tax-loss harvesting

If you have investments in a taxable account, review them before the year ends. Selling losing investments to offset gains can reduce your capital gains tax. Just be cautious of the wash-sale rule, which disallows a loss if you buy back the same or a “substantially identical” investment within 30 days.

3. Use your FSA and HSA wisely

If you have a flexible spending account (FSA), check the balance. Many FSAs are “use it or lose it” by year’s end, though some plans allow a small rollover. Health savings accounts (HSAs) don’t have this issue, but making the maximum contribution before December 31 can still increase your tax savings and grow your healthcare nest egg.

4. Consider charitable giving

Charitable contributions can be deducted if you itemize. Donating cash, appreciated stock, or even household items to qualified charities not only helps a cause you care about but can lower your taxable income. Keep detailed records and receipts. If your donations exceed a certain amount, you’ll need official acknowledgment from the charity.

5. Defer income or accelerate deductions

If you’re self-employed or have control over when you receive income, consider deferring income into next year, especially if you expect to be in a lower tax bracket. Conversely, accelerating deductions — paying deductible expenses this year — can help cut your current tax bill.

6. Double-check withholding and estimated payments

Avoid surprises in April by checking if you’ve withheld enough or made adequate estimated tax payments. Underpaying could mean penalties, while overpaying gives the IRS an interest-free loan.

Conclusion

Year-end tax planning isn’t just a chore; it’s a smart financial habit. By making deliberate moves now — boosting retirement savings, harvesting losses, giving strategically, and managing income and expenses — you can lower your tax liability and position yourself for a stronger start to the new year. As always, consult a tax professional for advice tailored to your situation. A little planning today can save you a lot tomorrow