Year-End Tax Moves: What to Do Before December 31st

As the calendar year comes to a close, business owners and individuals alike have a crucial opportunity to reduce tax liabilities and strengthen financial strategies before the December 31st deadline. Proactive tax planning now can mean significant savings when filing in the spring. Here’s what you should prioritize before year-end to maximize deductions, improve cash flow, and prepare for 2026.

Why Year-End Tax Planning Matters

Once the year closes, most tax-saving opportunities are gone. By making strategic moves before December 31st, you can:

• Lower your taxable income.
• Accelerate deductions into the current year.
• Take advantage of credits while they’re still available.
• Improve cash flow and budgeting for the year ahead.

Key Year-End Tax Strategies for Individuals

• Max Out Retirement Contributions
  Contribute to 401(k)s, IRAs, or SEP IRAs before year-end. Contributions reduce taxable income while building long-term savings.
• Harvest Tax Losses
  Sell underperforming investments to offset capital gains. This strategy, known as tax-loss harvesting, can minimize your overall tax burden.
• Make Charitable Contributions
  Donations to qualified charities may be deductible. Consider giving appreciated stock instead of cash for additional tax benefits.
• Use Flexible Spending Accounts (FSAs)
  Spend any remaining FSA balances before they expire—some plans allow small carryovers, but many are “use it or lose it.”
• Review Withholding and Estimated Payments
  Check your year-to-date withholding or estimated tax payments to avoid penalties.

Key Year-End Tax Strategies for Business Owners

• Accelerate Expenses
  Pay outstanding vendor invoices, bonuses, or recurring expenses before year-end to increase deductions.
• Defer Income
  Delay invoicing until January (if cash flow allows) to push income into the next tax year.
• Take Advantage of Section 179 & Bonus Depreciation
  Purchase equipment, vehicles, or technology to claim deductions in the current year.
• R&D Tax Credit
  If your business invests in product development or technology, claim the Research & Development (R&D) tax credit for valuable savings.
• Review Payroll for S-Corp Owners
  Ensure salaries are “reasonable” and distributions are properly structured before year-end to optimize tax treatment.
• Fund Retirement Plans
  Contribute to SEP IRAs, SIMPLE IRAs, or 401(k) plans to reduce taxable income and support long-term wealth building.

Additional Year-End Considerations

• Gifting Strategies – Individuals can gift up to $18,000 per recipient (2025 limit) without triggering gift taxes.
• Review Beneficial Ownership Reports – Stay compliant with new Corporate Transparency Act (CTA) rules.
• Check State and Local Obligations – Many states have unique year-end filing requirements for businesses.
• Update Financial Dashboards – Year-end is the ideal time to review KPIs, cash flow, and prepare budgets for the new year.

Final Thoughts

December 31st isn’t just the end of the year—it’s a hard deadline for many tax-saving opportunities. Whether you’re an individual optimizing deductions or a business owner reducing taxable income, taking action now ensures you won’t leave money on the table. By partnering with a CPA or tax advisor, you can implement customized strategies, stay compliant, and enter the new year financially strong.

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