Year-End Tax Checklist

Complete these essential tasks before December 31 to optimize your tax situation

Back to Taxes & Deductions

Why Year-End Tax Planning Matters

The weeks leading up to December 31 present your final opportunity to reduce your current year's tax liability. Many tax-saving strategies must be executed before the calendar year ends, making year-end tax planning one of the most important financial activities you can undertake.

Critical Deadline: December 31

Most tax deductions and strategies must be completed by December 31 to count for the current tax year. Some exceptions exist (like IRA contributions), but don't count on them—act now to maximize your savings.

Income Planning Strategies

1. Defer Income When Possible

If you expect to be in a lower tax bracket next year, consider strategies to defer income:

  • Delay year-end bonuses: If you're self-employed or can negotiate, push bonus payments into January
  • Postpone billing: Wait until late December to invoice clients so payment arrives in January
  • Defer capital gains: If you're planning to sell appreciated assets, consider waiting until January
  • Installment sales: Structure large asset sales to receive payments over multiple years
  • Stock option timing: Exercise options strategically based on your income projections

2. Accelerate Income When Beneficial

If you expect to be in a higher tax bracket next year, do the opposite:

  • Request bonuses and payments before year-end
  • Accelerate billing and invoice collection
  • Consider Roth conversions while you're in a lower bracket
  • Realize capital gains at your current lower rate

Income Timing Calculator

Recommendation:

Defer Income - Your income is expected to increase. Consider deferring income to this year's lower bracket.

Deduction & Credit Checklist

Retirement Contributions

  • ☐ Max out 401(k): 2024 limit is $23,000 ($30,500 if age 50+)
  • ☐ Contribute to traditional IRA: $7,000 limit ($8,000 if age 50+)
  • ☐ SEP IRA contributions: Up to 25% of compensation (self-employed)
  • ☐ Solo 401(k): Employee + employer contributions ($69,000 total limit)
  • ☐ HSA contributions: $4,150 individual / $8,300 family
  • ☐ 529 plan contributions: State tax deductions may apply

Charitable Giving

  • ☐ Make cash donations: Keep receipts for amounts over $250
  • ☐ Donate appreciated stock: Avoid capital gains and get full deduction
  • ☐ Bunch donations: Combine multiple years into one for larger deduction
  • ☐ Qualified Charitable Distributions: If over 70½, donate up to $105,000 from IRA
  • ☐ Donor-advised funds: Get immediate deduction, distribute later
  • ☐ Document everything: Get written acknowledgments from charities

Tax Loss Harvesting

Review your investment portfolio and strategically sell losing positions to offset gains:

  • Offset capital gains: Losses offset gains dollar-for-dollar
  • Deduct excess losses: Up to $3,000 can offset ordinary income
  • Carry forward: Unused losses carry forward indefinitely
  • Avoid wash sales: Don't repurchase the same security within 30 days
  • Consider tax lots: Choose which shares to sell for optimal tax treatment

⚠️ Wash Sale Rule Warning

If you sell a security at a loss and repurchase the same or "substantially identical" security within 30 days before or after the sale, the loss is disallowed. Plan your trades carefully!

Medical Expenses

  • ☐ Schedule elective procedures: Time medical expenses to exceed 7.5% AGI threshold
  • ☐ Pay outstanding medical bills: Get credit for current year if paid by 12/31
  • ☐ Purchase needed equipment: Glasses, hearing aids, etc.
  • ☐ Prepay January premiums: If you can charge in December
  • ☐ Document mileage: 22 cents per mile for medical travel in 2024

Business Expenses (Self-Employed & Business Owners)

  • ☐ Purchase equipment: Section 179 allows up to $1,220,000 immediate deduction
  • ☐ Pay employee bonuses: Deductible if paid by year-end
  • ☐ Prepay expenses: Rent, insurance, supplies (if cash basis taxpayer)
  • ☐ Contribute to employee retirement plans: Deadlines vary by plan type
  • ☐ Clean up receivables: Write off uncollectible accounts
  • ☐ Review inventory: Write down obsolete or damaged goods
  • ☐ Set up retirement plan: Some plans can be established by 12/31

Required Actions & Distributions

Required Minimum Distributions (RMDs)

⚠️ Critical: Avoid 50% Penalty

If you're age 73 or older, you must take your RMD by December 31 (or April 1 of the year after turning 73 for your first RMD). The penalty for missing this deadline is 25% of the amount you should have withdrawn. This is one tax deadline you absolutely cannot miss!

  • Calculate your RMD: Use IRS life expectancy tables
  • Take from all accounts: Each IRA requires separate calculation (can aggregate withdrawals)
  • 401(k) RMDs: Must take separately from each 401(k)
  • QCD strategy: Direct up to $105,000 to charity to satisfy RMD
  • Inherited IRAs: Different rules apply—check your specific requirements

Estimated Tax Payments

Fourth quarter estimated tax payment is due January 15, but paying by December 31 may be advantageous:

  • Deductible in current year if you itemize
  • Helps avoid underpayment penalties
  • Particularly important if you had large capital gains or other unexpected income

Family Tax Planning

Child & Dependent Care

  • ☐ Max out dependent care FSA: $5,000 limit
  • ☐ Pay December care in December: Get credit for current year
  • ☐ Document care provider: You'll need their SSN or EIN
  • ☐ Review Child Tax Credit eligibility: Up to $2,000 per qualifying child
  • ☐ Education credits: American Opportunity and Lifetime Learning Credits

Gift Tax Considerations

The annual gift tax exclusion is $18,000 per recipient in 2024:

  • Give up to $18,000 per person without filing a gift tax return
  • Married couples can give $36,000 per recipient
  • Consider gifting appreciated assets to family members in lower tax brackets
  • 529 plan superfunding: Give 5 years' worth ($90,000) at once
  • Pay medical or tuition expenses directly to institutions (unlimited, not considered gifts)

Documentation & Organization

Gather Required Documents

  • ☐ Income statements: W-2s, 1099s, K-1s
  • ☐ Charitable donation receipts: Written acknowledgments required for $250+
  • ☐ Medical expense records: Including mileage logs
  • ☐ Investment statements: Brokerage statements showing cost basis
  • ☐ Property tax statements: Deductible up to $10,000 total for SALT
  • ☐ Mortgage interest statements: Form 1098
  • ☐ Business expense receipts: Organized by category
  • ☐ Retirement contribution confirmations: All accounts
  • ☐ HSA/FSA documentation: Contributions and qualified expenses
  • ☐ Education expenses: Form 1098-T and receipts

Digital Organization Tips

  • Scan and digitize all receipts immediately
  • Use cloud storage with organized folders by tax year and category
  • Consider tax preparation software to track throughout the year
  • Keep digital and physical copies of all tax returns for at least 7 years
  • Create a checklist of documents you need to receive in January

Special Situations

Life Changes That Affect Taxes

If any of these occurred this year, special tax considerations apply:

  • Marriage: May want to adjust withholding, consider filing status
  • Divorce: Dependency exemptions, alimony (if decree pre-2019), property transfers
  • Birth/adoption: Child Tax Credit, dependent care FSA, life insurance
  • Job change: Review retirement plan rollover options, HSA portability
  • Home purchase: Mortgage interest deduction, property tax deduction
  • Home sale: $250,000/$500,000 capital gains exclusion
  • Starting a business: Consider entity structure, quarterly estimated taxes
  • Retirement: Tax planning for distributions, healthcare before Medicare

Disaster Relief & Special Circumstances

  • Casualty and theft losses (federally declared disaster areas only)
  • Retirement plan hardship distributions
  • First-time homebuyer IRA withdrawals
  • Qualified disaster distributions
  • Education loan interest deductions

January Deadlines (Early 2025)

Some tax-saving opportunities extend slightly into the new year:

📅 January 15, 2025

  • Q4 2024 estimated tax payment due
  • Pay property taxes (if not paid in 2024) for SALT deduction

📅 April 15, 2025

  • Traditional IRA contributions for 2024 (up to $7,000/$8,000)
  • Roth IRA contributions for 2024
  • HSA contributions for 2024 (if eligible)
  • File tax return or extension request

Common Year-End Tax Mistakes to Avoid

❌ Don't Make These Errors

  • Missing the RMD deadline: 50% penalty is devastating
  • Bunching itemized deductions incorrectly: You need to exceed standard deduction ($14,600 single / $29,200 married)
  • Forgetting about AMT: Some deductions may not help if you're subject to Alternative Minimum Tax
  • Wash sale violations: Destroys your tax loss harvesting strategy
  • Contributing to wrong IRA type: Income limits apply to Roth and deductible traditional IRAs
  • Overcontributing to retirement accounts: 6% penalty on excess contributions
  • Not documenting charitable donations: No receipt = no deduction
  • Paying next year's expenses too early: Generally can't prepay more than 12 months

When to Consult a Tax Professional

Consider hiring professional help if you:

  • Experienced major life changes (marriage, divorce, inheritance)
  • Started or sold a business
  • Have complex investment portfolios with multiple asset types
  • Own rental properties or other investment real estate
  • Have international income or accounts
  • Are subject to Alternative Minimum Tax
  • Have stock options, restricted stock, or other complex compensation
  • Made large charitable contributions (especially non-cash)
  • Are self-employed with significant income
  • Face IRS audit or have tax controversies

Take Action Now

Year-end tax planning is not procrastination-friendly. Start working through this checklist today to ensure you have time to implement strategies before December 31. Many opportunities, once missed, are gone forever. Download this checklist, print it out, and start checking boxes. Your future self (and bank account) will thank you.

Need Help?

Tax planning can be complex. If you're unsure about any of these strategies or have questions specific to your situation, consult with a qualified tax professional or CPA before December 31.