Don't wait until January to think about taxes. Year-end planning can save you thousands of dollars. Here are strategic moves you can make before December 31st to minimize your tax liability.
Bunching Deductions
If you're close to itemizing, consider bunching charitable donations or medical expenses into one year to exceed the standard deduction threshold.
Example: Standard deduction is $27,700. If you have $26,000 in deductions, make additional charitable donations of $2,000 to exceed the threshold.
Retirement Contributions
Maximize contributions to reduce your taxable income:
Traditional IRA
2024 limit: $7,000 ($8,000 if 50+). Deadline: Tax filing date (usually April 15).
401(k)
2024 limit: $23,500 ($31,000 if 50+). Deadline: December 31.
SEP-IRA
Self-employed: Up to 20% of net earnings. Deadline: Tax filing date.
Solo 401(k)
Self-employed: Up to $69,000 (2024). Deadline: December 31.
Tax-Loss Harvesting
Sell underperforming investments to offset capital gains from winners. This can reduce your overall capital gains tax significantly.
⚠️ Wash Sale Rule: Don't buy back the same investment within 30 days of selling at a loss.
Charitable Giving
Make charitable donations before December 31 to deduct them in the current tax year. Keep receipts and documentation.
- Cash donations
- Appreciated securities (avoid capital gains tax)
- Non-cash donations (clothing, household items)
- Vehicle donations
- Charitable gifts of stock
Business Expenses
Self-employed? Purchase business equipment before year-end to deduct it in the current year:
- Office equipment and supplies
- Computer equipment and software
- Vehicle purchases
- Professional development courses
Year-End Tax Planning Checklist
✓ Review your current tax bracket
✓ Calculate estimated tax liability
✓ Maximize retirement contributions
✓ Harvest investment losses
✓ Make charitable donations
✓ Purchase business equipment
✓ Review withholdings for next year
✓ Plan for quarterly estimated taxes (if self-employed)