Last-Minute Tax Moves to Consider Before Year End

As the year draws to a close, your focus might be on holiday preparations and finalizing business goals for the new year. However, the final weeks of December also offer a critical window to make strategic financial moves that can significantly impact your tax bill. As a business owner, you’re constantly juggling growth initiatives and operational demands. Taking a moment now for tax planning can help you retain more of your hard-earned revenue, setting you up for a stronger financial start to the coming year.

Many business owners find themselves working over 40 hours a week just to keep things running, leaving little time for strategic financial planning. But a few smart actions before the clock strikes midnight on December 31 can make a real difference. Let’s explore some key strategies to consider.

Maximize Your Retirement Contributions

One of the most effective ways to lower your taxable income is by maximizing contributions to your tax-deferred retirement accounts. These contributions not only build your nest egg but also provide an immediate tax benefit.

Workplace Retirement Plans (401(k)s)

If you have a 401(k) or a similar workplace plan, now is the time to ensure you’ve contributed as much as possible. For 2025, the contribution limit is $23,500. If you are age 50 or older, you can make an additional catch-up contribution of $7,500, bringing your total to $31,000. Some plans even offer a “supersize” catch-up for those aged 60-63, allowing for an even larger contribution.

At a minimum, contribute enough to receive your full employer match, if one is offered. Not doing so is like leaving free money on the table. If you’re in a position to do more, maxing out your contributions can substantially reduce your current year’s taxable income and accelerate your long-term savings.

Traditional and Roth IRAs

You technically have until the tax filing deadline in April to contribute to an IRA for the previous year. However, the sooner you contribute, the sooner your money can begin growing tax-deferred. For 2025, you can contribute up to $7,000 to a traditional IRA, with an additional $1,000 catch-up if you’re 50 or older. Contributions to a traditional IRA may be tax-deductible, depending on your income and whether you’re covered by a workplace retirement plan.

A Roth IRA is another powerful tool. While contributions are made with after-tax dollars (meaning no immediate tax deduction), your withdrawals in retirement are tax-free. If you anticipate being in a higher tax bracket in the future, a Roth IRA or a Roth conversion could be a savvy long-term move.

Optimize Your Investment Portfolio with Tax-Loss Harvesting

Year-end is the perfect time to review your investment portfolio. Tax-loss harvesting is a strategy that involves selling underperforming investments to realize losses. These losses can then be used to offset any capital gains you’ve realized during the year, effectively reducing your tax liability on those gains.

Here’s how it works:

1. Tally your gains: Calculate the total capital gains you’ve realized from selling profitable investments.
2. Identify your losses: Find investments in your portfolio that are currently valued at less than what you paid for them.
3. Offset gains with losses: Sell the losing investments to realize the losses. These losses can offset your gains dollar-for-dollar.

If your losses exceed your gains, you can use up to $3,000 of the excess loss to reduce your ordinary income. Any remaining loss can be carried forward to future years to offset future gains. Be mindful of the “wash-sale rule,” which prevents you from claiming a loss if you buy the same or a “substantially identical” security within 30 days before or after the sale.

Be Strategic with Charitable Giving

If you plan to itemize deductions, making charitable contributions before year-end is a great way to support causes you care about while also lowering your tax bill.

• Cash Donations: You can generally deduct cash donations to qualified charities.
• Donating Appreciated Assets: A more powerful strategy is to donate appreciated assets, like stocks you’ve held for more than a year. You can deduct the full fair-market value of the asset and avoid paying capital gains tax on the appreciation. This allows you to give more while also maximizing your tax benefit.
• Qualified Charitable Distributions (QCDs): If you are 70½ or older, you can donate directly from your IRA to a charity. This move can satisfy your Required Minimum Distribution (RMD) for the year without the distribution being counted as taxable income.

Manage Your Income and Deductions

Timing is everything. Depending on your financial outlook for the next year, you can either defer income or accelerate deductions to manage your tax burden.

Defer Income

If you expect to be in the same or a lower tax bracket next year, you might want to defer some income. If you’re self-employed, this can be as simple as waiting to send out invoices for work completed in late December until the beginning of January. This pushes the income—and the tax on it—into the next tax year. Similarly, you might consider delaying the sale of a profitable asset until the new year.

Accelerate Deductions

Conversely, if you expect to be in a higher tax bracket next year, you might want to accelerate your deductions into the current year. This could involve pre-paying certain deductible expenses, such as:

• State and local income taxes due in January.
• Property tax bills.
• Deductible medical expenses.

This strategy, often called “bunching,” is particularly useful if your total itemized deductions are close to the standard deduction amount. By cramming more deductible expenses into one year, you can exceed the standard deduction and claim a larger write-off.

Unlock Your Growth Potential at Our Upcoming Event

Feeling overwhelmed by tax planning and financial strategy? You’re not alone. Many business owners are so focused on running their company that they miss opportunities to work smarter, not harder.

At the next event, you’ll gain exclusive access to the expert guidance and peer networks needed to elevate your financial strategy. Our workshops are designed for business owners like you who are ready to scale their operations, delegate with confidence, and achieve growth without the burnout. You will learn practical, implementable strategies for everything from tax planning and financial systems to leadership development and operational efficiency.

Stop letting tax season catch you by surprise. Join us and transform how you manage your finances. Empower yourself with the knowledge to make confident decisions that will drive your business forward and help you build the life you want.

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