Year-End Tax Planning

Year-end tax planning involves reviewing a taxpayer’s financial situation and taking steps to minimize their tax liability before the close of the tax year. This process allows taxpayers to make strategic decisions that can lower their taxable income, increase their eligibility for credits, and reduce the overall tax bill.

Common year-end tax planning strategies include:

• Maximizing retirement contributions: Taxpayers can contribute to tax-deferred accounts like 401(k)s or IRAs before the year ends to reduce taxable income.
• Harvesting tax losses: Selling investments at a loss to offset capital gains can help reduce the tax owed on investment income.
• Charitable donations: Donations to qualified charities can be deducted, reducing taxable income if the taxpayer itemizes deductions.
• Paying deductible expenses: Prepaying certain expenses, such as medical bills or property taxes, may increase deductions for the current tax year.

Year-end tax planning is especially important for taxpayers who are close to moving into a higher tax bracket or who expect major financial changes in the upcoming year. By proactively managing income and deductions, taxpayers can maximize tax savings and avoid surprises when filing their return.