The final months of the year are the best time to make moves that impact your tax bill. Use this year-end tax planning checklist to make sure nothing slips through the cracks before December 31.
1. Review Your Withholding: Check your latest pay stub to confirm you’re on track — not overpaying or underpaying — for the year.
2. Maximize Retirement Contributions: See how much more you can contribute to your 401(k) or IRA before the contribution deadline.
3. Use Your FSA Funds. Flexible Spending Account balances often don’t roll over, so use remaining funds before they expire.
4. Harvest Investment Losses: Offset capital gains by selling underperforming investments before year-end.
5. Bundle Charitable Donations: If you’re close to the itemizing threshold, consider making additional donations before December 31.
6. Review Your Business Expenses: If you’re self-employed, consider prepaying certain deductible expenses or purchasing needed equipment before year-end.
7. Take Required Minimum Distributions (RMDs). If applicable, make sure you’ve taken any required distributions from retirement accounts to avoid penalties.
8. Check Your Health Savings Account: Confirm you’ve contributed enough to your HSA to maximize the deduction, if you’re eligible.
9. Review Life Changes: Marriage, a new child, a new job, or a home purchase can all affect your tax situation — make sure your withholding and filing status reflect these changes.
Tax Credits vs. Tax Deductions
10. Organize Your Documents. Start gathering W-2s, 1099s, and receipts now so you’re not scrambling in the spring.
11. Estimate Your Tax Bill: Use a tax calculator or work with a professional to estimate what you’ll owe, so there are no surprises.
12. Schedule a Check-In with a Tax Professional. A short consultation before year-end can uncover last-minute opportunities you might otherwise miss.
Final Thoughts:
Following a year-end tax planning checklist ensures you’re taking advantage of every opportunity available before the calendar resets. A little effort in December can mean real savings when you file in the spring.
FAQs
1. Why is year-end tax planning important?
It’s your last opportunity to make moves — like maximizing retirement contributions or harvesting losses — that impact the current tax year before it closes.
2. What happens to unused FSA funds at year-end?
In most cases, unused Flexible Spending Account funds don’t roll over, so it’s important to use them before they expire.
3. Can I still contribute to my 401(k) after December 31?
No, 401(k) contributions for a given tax year generally must be made by December 31, unlike IRA contributions which have a later deadline.
4. Is it too late to do tax planning in December?
No, December is actually one of the best times to review your finances and make last-minute adjustments before the year closes.
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