Before December 31, review these tax moves — once the calendar year closes, most of these opportunities disappear. Smart year-end tax planning can save you $500-$5,000+ depending on your situation.
Year-End Tax Checklist
| # | Action | Deadline | Potential Savings |
|---|---|---|---|
| 1 | Max out 401(k) contributions | Dec 31 | $3,500-$8,000 in tax savings |
| 2 | Harvest investment losses | Dec 31 | Offset gains + $3,000 vs. income |
| 3 | Make charitable donations | Dec 31 | Deduction if itemizing |
| 4 | Spend your FSA balance | Dec 31 (or grace period) | Don’t lose unspent FSA money |
| 5 | Contribute to HSA | April 15 (but plan by Dec 31) | $4,300-$8,550 deduction |
| 6 | Consider Roth conversion | Dec 31 | Future tax-free withdrawals |
| 7 | Bunch deductions if near threshold | Dec 31 | Push over standard deduction |
| 8 | Fund 529 plan | Dec 31 | State tax deduction (some states) |
| 9 | Review withholding (W-4) | Dec 31 | Avoid big bill or excessive refund |
| 10 | Take Required Minimum Distributions (if 73+) | Dec 31 | Avoid 25% penalty on missed RMD |
401(k) Year-End Strategies
| Strategy | How | Impact |
|---|---|---|
| Max out contributions | Increase payroll contribution % for remaining paychecks | Up to $23,500-$34,750 tax-deferred |
| Catch-up contributions (50+) | Verify you’re contributing the extra amount | +$7,500-$11,250 |
| Check employer match | Ensure you’ve contributed enough to get full match | Free money |
| Consider Roth vs. Traditional | Switch contribution type if tax situation changed | Tax diversification |
Tax-Loss Harvesting Guide
| Step | Action |
|---|---|
| 1 | Review investment portfolio for positions with losses |
| 2 | Sell losing positions to realize the loss |
| 3 | Use losses to offset capital gains from the year |
| 4 | Deduct up to $3,000 of net losses against ordinary income |
| 5 | Carry forward any remaining losses to future years |
| 6 | Wait 31+ days before buying the same security (wash-sale rule) |
| 7 | Consider buying a similar (but not identical) investment immediately |
Example:
| Item | Amount |
|---|---|
| Capital gains from selling Fund A | +$8,000 |
| Capital loss from selling Fund B | -$5,000 |
| Net capital gain | $3,000 (taxed at capital gains rate) |
| Without harvesting Fund B loss | Full $8,000 taxed |
| Tax saved (15% cap gains rate) | $750 |
Charitable Giving Strategies
| Strategy | How It Works |
|---|---|
| Donate appreciated stock | Avoid capital gains tax + get full deduction |
| Bunch donations (every other year) | Exceeds standard deduction threshold in one year |
| Donor-advised fund | Contribute a lump sum this year, distribute to charities over time |
| Qualified Charitable Distribution (70½+) | Donate from IRA directly — counts toward RMD, not taxable income |
FSA: Use It or Lose It
| FSA Type | Deadline | Action |
|---|---|---|
| Healthcare FSA | Dec 31 (+ grace period if employer offers) | Schedule appointments, buy eligible items |
| Dependent Care FSA | Dec 31 | Ensure all childcare expenses are documented |
| Limited Purpose FSA | Dec 31 | Dental and vision expenses only |
Roth Conversion Opportunity
| Best Time to Convert | Why |
|---|---|
| Income is lower than usual (job change, sabbatical) | Lower tax bracket = cheaper conversion |
| Early retirement years before Social Security | Income gap = low tax rate |
| Market is down | Convert the same number of shares at a lower tax cost |
| You expect higher taxes in the future | Lock in today’s rate |
The Bottom Line
December is the last chance to reduce your current year tax bill. The biggest moves: maximize 401(k) contributions, harvest investment losses, make charitable donations (especially appreciated stock), spend your FSA, and consider Roth conversions in low-income years. These aren’t aggressive strategies — they’re standard tax planning that everyone should review annually.
Related: Things to Do Before Filing Taxes | Documents to Gather Before Tax Season