What Should I Do Before December 31 to Reduce My Tax Bill?
As the year winds down, investors and business owners alike begin to consider how to best position themselves for the upcoming tax season. Strategic year-end financial planning is a vital step in managing your tax liability and ensuring your financial decisions align with long-term goals. Below are answers to common questions that can help you make informed, compliant decisions before December 31.
Q1: What is tax-loss harvesting, and how can it help reduce my tax bill?
Answer:
Tax-loss harvesting is a strategy that involves selling investments that have declined in value to realize a capital loss. These losses can offset capital gains from other investments, potentially reducing your overall taxable income. For example, if you sold a stock earlier in the year for a gain, selling another investment at a loss before year-end may help balance your tax exposure. It’s important to consider the IRS’s “wash-sale rule,” which prohibits repurchasing the same or substantially identical security within 30 days of the sale.
Read more: [Strategic Year-End Financial Planning: Maximize Tax Efficiency and Set the Stage for 2026]
Q2: Are there specific retirement contributions I should prioritize before year-end?
Answer:
Yes. Maximizing contributions to tax-advantaged retirement accounts such as Traditional IRAs, Roth IRAs, and employer-sponsored plans like 401(k)s can be an effective way to reduce taxable income. For 2025, individuals under 50 can contribute up to $7,000 to an IRA and up to $22,500 to a 401(k), with additional catch-up contributions allowed for those 50 and older and a new “super catch-up" for those 60 – 63 that started in 2025 due to the SECURE Act 2.0 Contributions to Health Savings Accounts (HSAs) also offer triple tax advantages—contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free.
Read more: [Strategic Year-End Financial Planning: Maximize Tax Efficiency and Set the Stage for 2026]
Q3: How can charitable giving impact my tax strategy?
Answer:
Charitable contributions made to qualified organizations before December 31 may be deductible if you itemize your taxes. Beyond cash donations, consider donating appreciated securities, which can provide a charitable deduction for the full market value while avoiding capital gains tax. Donor-Advised Funds (DAFs) are another tool that allows you to make a charitable contribution now and decide later which organizations to support, offering flexibility and potential tax benefits.
Read more: [Strategic Year-End Financial Planning: Maximize Tax Efficiency and Set the Stage for 2026]
Q4: What should business owners consider for year-end tax planning?
Answer:
Business owners may benefit from reviewing expenses and income timing. Accelerating deductible expenses—such as equipment purchases or vendor payments—before year-end can reduce taxable income. Conversely, deferring income to the next tax year may be advantageous depending on projected earnings. It’s also wise to evaluate retirement plan contributions for employees and consider establishing or funding plans like SEP IRAs or Solo 401(k)s.
Read more: [Strategic Year-End Financial Planning: Maximize Tax Efficiency and Set the Stage for 2026]
Q5: Are there gifting strategies I should consider before year-end?
Answer:
Yes. Individuals can gift up to $19,000 per recipient in 2025 without triggering gift tax reporting requirements. Strategic gifting can help reduce the size of your taxable estate while supporting family members or philanthropic causes. For those with larger estates, it may be beneficial to consult with a financial advisor or estate planning attorney to explore advanced strategies such as irrevocable trusts or charitable remainder trusts.
Read more: [Strategic Year-End Financial Planning: Maximize Tax Efficiency and Set the Stage for 2026]
Final Thought:
Year-end tax planning is not about rushing decisions—it’s about making informed, timely choices that support your broader financial strategy. Bellwether Wealth’s advisor-led approach ensures that every recommendation is grounded in data, aligned with your goals, and compliant with regulatory standards.
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This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.