8 Year-End Tax Moves to Make Before December 31

The end of the year sneaks up fast, and once December 31 passes, several year-end tax planning opportunities close with it. Tax Day isn't until spring, but a handful of moves only count if you make them before the calendar flips. Here's what's worth reviewing before then.

Max Out Your Retirement Contributions

If your employer matches contributions to your 401(k), make sure you're getting the full match this year, that's money left on the table otherwise. If you can afford to contribute more, doing so lowers your taxable income now and grows your savings for later. Catch-up contributions are available if you're 50 or older, so double check you're using them if you qualify.

Also worth a look: an IRA contribution. You technically have until the April filing deadline to make one for this tax year, but getting the money in sooner gives it more time to grow. If you're not sure your accounts are working together toward one plan, our retirement planning page walks through how we approach it.

Take Your Required Minimum Distribution (RMD)

If you're 73 or older, the IRS requires you to withdraw a minimum amount from your tax-deferred retirement accounts each year. Miss the deadline and you're looking at a steep penalty, so this is one to confirm before year-end, not after.

Consider a Roth Conversion Before December 31

If your income was lower than usual this year, it might be a good year to convert some traditional retirement savings into a Roth. You pay tax on the converted amount now, but future withdrawals in retirement come out tax-free. This tends to make the most sense if you expect to be in a higher tax bracket later in life than you are today.

Review Your Charitable Giving for Tax Savings

If you give to charity and plan to itemize deductions, timing matters. Donating appreciated investments instead of cash lets you skip the capital gains tax while still getting the deduction for the full value. And if you're 70½ or older, giving directly from an IRA (called a qualified charitable distribution) can satisfy some or all of your required distribution without adding to your taxable income.

Use Tax-Loss Harvesting to Offset Investment Gains

If some of your investments lost value this year, selling them can offset gains elsewhere in your portfolio, a strategy known as tax-loss harvesting. If your losses outweigh your gains, up to $3,000 of the extra can be used to reduce other income, and anything beyond that carries forward to future years. Just be careful not to buy back the same investment too soon afterward, the IRS has a rule against that.

Check Your Tax Bracket Before You Decide Anything

What makes sense here depends heavily on where your income landed this year. If it's higher than expected, accelerating deductions (charitable gifts, retirement contributions) can help keep you in a lower bracket. If it's lower than expected, that might actually be a good year to realize gains or do a Roth conversion at a reduced cost. If you've got money spread across several old accounts, year-end is also a good time to look at consolidating accounts so the whole picture is easier to manage.

Don't Forget Your Flexible Spending Account (FSA)

If you have a flexible spending account through work, check the balance. Most plans require you to use the money by year-end or lose it, though some employers offer a grace period into the following spring.

Talk to a Financial Advisor Before You Act

Every one of these year-end tax moves depends on your specific situation, your income, your age, your goals. What helps one family can hurt another. Before making any year-end decisions, it's worth sitting down with someone who knows your full financial picture.

Schneider Financial helps families in Maplewood and Morristown, NJ plan ahead instead of scrambling in December. Schedule a free meeting before the year runs out.

Schneider Financial Management LLC

1585 Springfield Ave | Maplewood, NJ 07040

1099 Mount Kemble Ave | Morristown, NJ 07960

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