Improving Your Taxes Before Year End
First things first: timing matters.
Year-end planning is about what you can still influence before December 31. Many tax strategies require action by the end of the calendar year; a few others allow a bit more time (typically the tax filing deadline – April 15). The earlier you act, the more options you have and the more your bottom line can benefit.
Game plan:
Read over the article
Focus on 2–3 moves that make sense for you
Put 30–60 minutes on the calendar this week to strategize.
💡 Make it simple: download our checklist
Part 1: Moves for W-2 Earners & Families
1) Max (or top-off) tax-advantaged accounts
401(k)/403(b)/457: Log in and increase your deferral for the last few pay periods if you can. Even a short-term bump helps.
Roth vs. Traditional: Choose based on your bracket, current cash flow, and long-term plan. In general, if you see future tax rate being higher than your current tax rate, Traditional is your friend. When the opposite is true, favor Roth - We can help you dial this in.
HSA – Health Savings Account (if you have a HDHP – high-deductible health plan): Pre-tax contributions, tax-free growth, tax-free qualified withdrawals—triple advantage. Check what’s left to contribute for the year. Use it like an investment account to get the triple tax break. If you immediately reimburse yourself for medical expenses, you only get 2 of the 3 advantages.
FSA/HRA – Flexible Spending Account/Health Reimbursement Account: Use it or lose it (with limited carryovers for some plans). Schedule dental/vision or eligible medical expenses now.
💡If cashflow is tight, redirect year-end bonuses or windfalls to retirement and HSA first. Employer match comes first, HSA comes second, additional savings strategy will depend on the person and situation.
2) Clean up your withholding and estimated taxes
Avoid a surprise bill: Use your most recent pay stub to check year-to-date withholding.
Get tax projections. Whether DIY through tax software or coming to us for a Holistaplan analysis, make sure you know your numbers to avoid surprises.
Adjust now: If you’re short, you can temporarily increase withholding on a final paycheck or bonus (withholding is treated as paid pro-rata through the year).
If you’re ahead: Consider easing withholding for December to free up cash (don’t overdo it). You can adjust this through a W4 and similar state form.
3) Leverage charitable giving for tax efficiency
Bunching: Combine two years of gifts into one tax year to potentially itemize, then take the standard deduction next year. You can also do this with property taxes and other deductible expenses.
DAF: Contribute before 12/31; recommend grants later.
Appreciated securities: Donate shares with large gains to potentially avoid capital gains and still support your cause.
QCDs (70½+): Send gifts directly from your IRA to reduce taxable income (and potentially satisfy RMDs when applicable).
💡 Two-for-one strategy: Pair a Roth conversion in a lower-income year with a large charitable contribution to keep your marginal rate in check. You may be able to shift more of your wealth to grow tax free without adding to your tax bill.
4) Optimize capital gains & losses (tax-loss or gain harvesting)
Tax-loss harvesting: Realize losses to offset realized gains this year (and potentially up to $3,000 of ordinary income, subject to rules).
Wash sale rule: If you sell an investment at a loss and buy a “substantially identical” one within 30 days before/after, the loss can be disallowed. Use similar (not identical) investments for temporary replacement.
0% long-term capital gains bracket: Some households can realize gains at 0% depending on taxable income—used thoughtfully, this can reset cost basis for future flexibility. Resetting basis is also why we like giving appreciated investment better than cash.
💡Don’t harvest losses blindly. Keep your target investment allocation and risk tolerance in focus. Avoid turning tax tactics into investment mistakes.
5) Roth conversions (fill your bracket)
What & why: Move money from a pre-tax IRA to a Roth IRA, paying tax today to pursue tax-free growth later.
The smart approach:
Estimate your marginal bracket and convert to at least the top of that bracket.
Consider pairing with charitable giving or a year with lower income.
Watch for IRMAA thresholds if you’re near Medicare premium surcharges.
Watch for other deductions that may phase out if your income gets too high.
Make sure you are converting at a tax rate that is equal to or lower than what you would expect to pay in the foreseeable future. It’s about lifetime tax minimization and gaining greater tax certainty.
6) Education planning touch-ups
529 plans: Consider year-end contributions for state tax benefits where applicable and for more time in the market. (Rules vary by state.)
Scholarship years: If your student received tax-free scholarships, coordinate 529 withdrawals to match qualified expenses.
Part 2: Moves for Retirees
1) Required Minimum Distributions (RMDs)
If applicable: Confirm you’ve satisfied your RMDs before 12/31 to avoid penalties. This is based on age but can also affect those who have inherited an IRA
QCD synergy: If over 701/2, use QCDs to satisfy some or all your RMD amount while keeping it out of taxable income.
2) Bracket management
Fill, but don’t spill: If your income is “between brackets,” consider harvesting gains or modest Roth conversions to at least fully utilize your current bracket without jumping into the next. Avoid this if you expect to drop brackets in future years.
Look ahead: A couple of calculated conversions in your 60s can significantly reduce lifetime taxes by lowering future RMDs. If you are higher net worth there can also be significant implications for estate taxes and inheritance.
3) Social Security & Medicare coordination
IRMAA awareness: Manage year-end moves that could push MAGI (modified adjusted gross income) over “IRMAA” thresholds (which increase your cost of Medicare 2 years later).
Withholding on benefits: Adjust if you had a big capital gain or conversion this year to avoid a tax surprise come filing time.
Part 3: Business owners, contractors, and the self-employed
1) Get your books clean now
Accurate books = better decisions: Reconcile accounts, categorize expenses, and set aside taxes. It’s hard to play the game if you don’t know what pieces you have to work with. A common cause of tax drag for business owners is reactive strategy and not knowing their numbers.
2) Be intentional about income & expense timing
Defer or accelerate income depending on your current and expected tax brackets and cash flow.
Prepay certain expenses you know you’ll incur early next year (if consistent with your accounting method).
Large purchases: Evaluate Section 179/bonus depreciation with your CPA (don’t buy just for a deduction – buy for strategy). Look into cost segregation for real estate which can give you a bigger deduction up front. Be aware of depreciation recapture on the back end.
3) Retirement plan horsepower
Solo 401(k), SEP-IRA, or SIMPLE IRA: The right plan depends on your income, employees, and timing.
Why it matters: These can dramatically increase deductible contributions. Setup deadlines vary; some plans must be established by year-end even if you fund them later.
Advanced: Consider exploring cash balance plans for high, stable income and a desire to maximize tax-deferred savings. There are also creative cases for Safe Harbor 401(k) plans, employee stock purchase plans, stock options, and deferred comp plans. Get your CPA, attorney, and financial advisor involved in these discussions.
4) S-Corp owner pay & QBI (199A)
Weight the pros and cons of filing as an S-Corp: S-Corps have to file their own return, pay unemployment taxes and have other added complexities but also allow the owner to split pay between salary (subject to 15.3% payroll taxes) and shareholder distributions (not subject to payroll taxes).
Reasonable compensation: If you file as an S-Corp, ensure W-2 wages are appropriate; this affects payroll taxes and QBI.
QBI planning: If you qualify for the Qualified Business Income deduction, pay attention income thresholds and wage/property tests—year-end bonuses or retirement contributions can tip the scales. This can be a big number on your taxes (saving 20% of the qualified business income). Special rules apply if you are considered to be a specialized service and trade business. This is why planning is crucial.
Part 4: Real-life “profiles” you can adopt
The “High Earner with a Charitable Heart”
Increase 401(k) deferrals for last pay periods
Transfer appreciated fund shares into a DAF before 12/31
Make year-end grants to desired nonprofits
Harvest losses to offset a big gain from earlier in the year
Run a “fill the bracket” Roth conversion to the top of your current marginal rate
The “Mid-Career Family”
Top off HSA (if eligible) and check FSA spending deadlines
Add small automatic 529 contributions for each child
Use bunching: fund two years of giving into a DAF now; automate grants monthly next year. Consider impact of doing this with allowed deductible expenses
Rebalance portfolio and harvest a modest loss to offset gains
Run a tax planning analysis and do W-4 adjustments to fix withholding for next year
The “Retiree on RMDs”
Make sure to satisfy your RMDs; use QCDs for charitable giving
Consider a strategic Roth conversion to reduce future RMDs and lifetime taxes
Review Medicare IRMAA and other income phase outs before converting too much
Trim appreciated investments to use 0% gains or lower taxation if available
🛑 Avoid These Common Mistakes
Chasing deductions at the expense of cash flow. A deduction is not a dollar-for-dollar benefit. Spending a dollar for the purpose of saving $0.32 on taxes is a bad move unless that dollar moves you towards you goals.
Selling and staying out of the market. Tax-loss harvesting is a trade, not a retreat; reinvest promptly in a similar (not identical) holding.
Ignoring state taxes. Strategies can work differently at the state level and states have their own rules to play by.
Waiting until December 30. Some transfers take days, or even weeks. QCDs and in-kind gifts need runway. Start your plan today and be able to focus on what matters during the Christmas/holiday season.
Final Thoughts
How StillWater helps—quickly and clearly
Bracket modeling: Show the tax impact of conversions, gains, and deductions before you pull the trigger
Charitable execution: Coordinate DAF setup, in-kind transfers, and QCDs
Investment alignment: Keep your goal-based investment plan intact while harvesting losses or repositioning gains
Business owner planning: Retirement plan selection, and year-end playbook
Team approach: Coordinate with your CPA and attorney so everyone’s on the same page and all your experts are rowing in the same direction.
Tax Action: Intrigued by some of the ideas in this article but feeling lost on how or where to start? We’ll help you the move that matter most for you—and make sure they get completed on time.
(Educational only; not tax or legal advice. Consult your tax professional about your situation.)
