Year-End Tax Planning Deadlines and Items to Consider
As the end of the year approaches, it’s the perfect time to tackle your tax planning. Whether you’re wrapping up 2024, preparing for 2025, or even glancing ahead to 2035, these tips will help you stay ahead. Though tax codes shift over time, many of these strategies apply year after year. By paying attention now, you can save yourself money and avoid future stress.
Below, you’ll find practical advice on investment strategies, retirement planning, contributions, and more. Ready to set yourself up for a smoother tax season? Let’s get started.
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Why Year-End Tax Planning Matters
Year-end tax planning isn’t just about meeting deadlines—it’s about making smart moves to manage your money effectively. December 31 puts a hard stop on many opportunities, from harvesting losses in your portfolio to contributing to savings accounts. Missing those deadlines may result in higher taxes or unused benefits.
It’s not just about this year, either. A little effort now can reduce your tax burden for years to come. With several tax rules set to change in 2025, this year is especially critical to reassess your strategies.
Let’s break down the key topics you need to know.
Investment Strategies for Year-End
Tax Loss Harvesting
Have investments that didn’t do so well this year? Tax loss harvesting lets you sell those underperforming assets to offset your taxable gains. This strategy reduces what you owe come tax time.
Remember the wash-sale rule: you can’t sell a stock and repurchase the same or a “substantially identical” investment within 30 days. Shop around for similar alternatives to keep your portfolio on track.
Why does this work? Let’s say you had $10,000 in gains from a strong market year, but you sell $5,000 in losses. That cuts your taxable gain in half. Additionally, any leftover losses can offset up to $3,000 of your ordinary income annually. The rest? You can roll those losses forward into future tax years.
Tax Gain Harvesting
Here’s a less common move: tax gain harvesting. This involves selling investments at a gain to lock in lower capital gains tax rates now, especially if you expect rates to increase in future years.
With talk of higher taxes on the horizon, 2024 might be a great time to consider this. It’s not as widely discussed as tax loss harvesting, but it’s a sneaky-smart way to stay ahead if you’ve had a good year in the markets.
Retirement Strategies and Distribution Deadlines
Required Minimum Distributions (RMDs)
If you’re in your 70s, you’re likely familiar with RMDs. For most retirement account owners, the government requires withdrawals starting at age 72 to 75, depending on your birth year.
The penalty for missing an RMD is steep—50%, to be exact. That’s no joke. If it’s December, double-check that you’ve met your RMD for the year. Even if you don’t need the money, overlooking this is an expensive mistake.
Qualified Charitable Distributions (QCDs)
QCDs are a fantastic way to use RMDs for a good cause. If you’re at least 70½, you can donate up to $100,000 directly from your IRA to a charity. The benefit? The donation isn’t taxable, and it satisfies your RMD requirement.
Make sure your accountant knows about any QCDs you’ve made. They don’t show up clearly on 1099 forms, and you don’t want to miss out on the tax break.
Roth Conversions
Want to avoid big RMDs down the line? A Roth conversion could be your ticket. This involves moving pre-tax money from an IRA into a Roth account. You’ll pay taxes now, but those funds grow tax-free—and future RMDs will be smaller since the balance of your traditional IRA decreases.
The trick is timing. Aim to “fill” lower tax brackets before December 31. This requires planning, but the payoff can be substantial.
Handling Changes in Income
Dealing with Irregular Income
Life throws curveballs—an inheritance, RSU vesting, stock options, bonuses, or simply under-withholding can shake up your tax picture for the year.
For scenarios like these, your Q4 estimated tax payment, due January 15, is your last chance to control your 2024 tax bill. While you can’t avoid an underpayment penalty entirely if you’re behind, a substantial Q4 payment minimizes it.
Talk to Your Accountant
If you’re not already working with an accountant, now’s the time to connect. Tax preparers are relatively accessible between October and early January. Come spring, they’re too swamped to give personalized advice.
Set up a year-end conversation to review your income, maximize deductions, and discuss strategies for the next tax year.
Contribution Deadlines for Retirement and Savings
Max Out Your Workplace Plans
Employee contributions to 401(k), 403(b), Roth 403(b), and 457(b) plans must be made by December 31. If you’re behind, ask HR to increase your payroll withholdings.
For the Self-Employed
If you’re self-employed, flexibility works in your favor. Contributions to solo 401(k)s and SEP IRAs are tied to your tax-filing deadline, giving you until April 15—or later if you file an extension. However, these accounts must usually be opened by December 31 to take advantage. Don’t wait to get that paperwork taken care of.
IRAs and Roth IRAs
With IRAs and Roth IRAs, you’ve got until your tax-filing deadline to make contributions. You can also take time to finalize a backdoor Roth conversion since the conversion itself doesn’t have the same strict timing.
Health Savings Accounts (HSAs)
Most HSA contributions follow the April tax filing deadline, but payroll deductions are a different story. Employer-based HSA contributions are tied to December 31, so plan accordingly if you want to max those out.
529 Plans
Deadlines for 529 education savings plans vary by state, but many require contributions by December 31 for tax benefits. Check your state rules and make adjustments before it’s too late.
Managing Flexible Spending Accounts (FSAs)
FSAs can save you money, but they’re one of those “use it or lose it” benefits. Look at your balance now. If you still have funds sitting there, find eligible expenses to apply them toward.
Some employers allow up to $640 to roll over into the next year or grant a grace period into mid-March. Most, however, require you to spend the money by the end of December. Small contributions may be better if you’re new to FSAs and unsure how much you’ll use.
Healthcare Deadlines
If your health insurance deductible or out-of-pocket maximum is met, now’s the time to schedule appointments and treatments. Need that knee surgery? Eye exam? Physical therapy? Get them done before everything resets on January 1.
Gifting Limits and Estate Updates
Annual Gifting Limits
For 2024, you can gift up to $18,000 per recipient without triggering gift taxes. Want to help a loved one financially? Now’s the time to hand over that tax-free check. But remember, you’ve got until 12/31 to make it count for this year.
Keeping Beneficiaries Current
Did your life change this year? Maybe you welcomed a new baby or finalized a divorce. Take a moment to review your beneficiary designations on retirement accounts, life insurance policies, and other assets. These updates are quick but essential to ensure your wishes are carried out.
Tools and Free Resources
Want to simplify all this? Downloadable tax planning tools, like checklists and flowcharts, are invaluable. They break down all these deadlines into manageable steps. If you’re overwhelmed, start here.
You can grab a free year-end tax planning flowchart here: https://go.wealthkeel.com/Yearendtodo
Final Thoughts
Year-end tax planning might not be the most exciting task, but the payoff can make a big difference. By handling your RMDs, optimizing contributions, and planning for the future, you’ll be better equipped to lower your tax bill and simplify your finances.
Take charge now, and give yourself something to celebrate when you ring in the new year!
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