As the holiday season approaches, tax season may be the last thing on your mind—but planning ahead before Thanksgiving can make a huge difference. Taking time now to organize your finances and implement smart tax strategies can save you both stress and money later.
Here are key year-end tax planning tips to help you close out the year strong and prepare for filing season with confidence.
1. Review Your Income and Deductions
Start by assessing your total income for the year and estimating your tax liability. Look for ways to balance it through deductions—like retirement contributions, charitable donations, or business expenses.
If you expect a higher income this year, consider deferring income to January or accelerating deductible expenses to the current year to reduce your taxable income.
2. Maximize Retirement Contributions
One of the easiest and most effective ways to lower your taxable income is by contributing to retirement accounts.
- 401(k): Contribute up to the annual limit before December 31.
- IRA: While you have until April 15 to contribute, getting it done early can give you a clearer year-end picture.
If your employer offers a match, make sure you contribute enough to take full advantage of it—it’s essentially free money.
3. Make Charitable Donations
Thanksgiving is the season of giving—and giving can benefit your taxes, too. Donations to qualified charities can be deducted if you itemize.
You can also donate appreciated stocks instead of cash to avoid capital gains taxes while supporting a good cause. Just be sure to keep receipts and verify the organization’s nonprofit status.
4. Manage Capital Gains and Losses
If you’ve sold investments this year, review your capital gains. Selling underperforming assets can help offset those gains, a strategy known as tax-loss harvesting.
Be mindful of the “wash-sale rule,” which prevents you from claiming a loss if you repurchase the same or similar investment within 30 days.
5. Check Your Withholding and Estimated Payments
Before the end of the year, check whether your tax withholdings or estimated payments are accurate. Underpaying can result in penalties, while overpaying gives the IRS an interest-free loan.
Adjust your Form W-4 if needed, especially if your income or family situation changed during the year.
6. Use Up Flexible Spending Accounts (FSA)
If you have an FSA for medical or dependent care expenses, review your balance before it expires. Some employers offer a small rollover or grace period, but in many cases, you’ll lose unused funds at year’s end.
Schedule medical appointments or buy eligible health-related items before December 31 to make full use of your account.
7. Review Business Expenses (for Entrepreneurs)
Small business owners should review deductible expenses now—like travel, equipment, or software purchases. Buying needed supplies or prepaying certain expenses before the year ends can reduce taxable income.
Consider consulting a tax advisor to ensure all eligible deductions are claimed, especially for home office or vehicle use.
8. Plan for Major Life Changes
If you got married, divorced, had a child, or bought a home this year, these changes can impact your tax filing status or deductions.
Update your information with your employer and plan ahead to avoid surprises come tax season.
9. Schedule a Year-End Tax Consultation
Finally, consider scheduling a meeting with a tax professional before Thanksgiving. They can review your situation, ensure you’re taking advantage of all possible deductions and credits, and help you plan for 2025.
Conclusion
Taking time to handle your year-end tax planning before Thanksgiving can help you enjoy the holidays worry-free—and set you up for a smoother, more profitable new year.
By reviewing your finances, maximizing deductions, and consulting with a professional early, you’ll save time, money, and stress when tax season arrives.
References: Consulting Success
