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Writer's pictureJessica Velazquez

Year-End Tax Planning: 7 Steps to Take Before December 31st

As the end of the year approaches, it’s time to start thinking about year-end tax planning. While tax season might still be a few months away, the actions you take before December 31st can have a significant impact on your tax bill and financial situation.


Effective year-end tax planning can help you minimize your tax liability, maximize deductions, and set your finances up for success in the coming year. Here’s a step-by-step guide to ensure you’re prepared. 



1. Review Your Income and Expenses 

Start by taking a close look at your income and expenses for the year. Understanding where you stand financially can help you identify opportunities to reduce your taxable income.


For example, if you expect to be in a lower tax bracket next year, consider deferring some income until after December 31st. On the other hand, if you anticipate being in a higher tax bracket next year, you might want to accelerate income to take advantage of the current lower rates. 


3. Take Advantage of Tax-Deferred Investments 

If you have investments in taxable accounts, consider strategies like tax-loss harvesting to offset capital gains with losses. This can help reduce your taxable income and lower your overall tax liability.


Additionally, if you’re planning to sell appreciated assets, be mindful of the timing to avoid pushing yourself into a higher tax bracket. Consult with your CPA to explore tax-deferred investment options that align with your financial goals. 


4. Plan for Charitable Contributions 

Charitable donations can provide significant tax benefits, but you need to plan carefully to maximize their impact. If you itemize deductions, consider making charitable contributions before the year ends.


Donating appreciated securities instead of cash can offer additional tax advantages by allowing you to avoid capital gains tax while still claiming a deduction for the fair market value of the asset. 


6. Evaluate Your Tax Withholding 

Year-end is a good time to review your tax withholding and make any necessary adjustments. If you’ve had a significant change in income, or if you’ve experienced major life events like marriage or the birth of a child, your withholding may need to be updated.


Ensuring your withholding is accurate can help you avoid a surprise tax bill or penalty when you file your tax return. 


7. Consult with Your CPA 

Year-end tax planning can be complex, and the best strategies depend on your unique financial situation. Consulting with a CPA can help you navigate the intricacies of tax law, identify opportunities for savings, and ensure you’re taking the right steps to minimize your tax liability.


Your CPA can also help you plan for upcoming changes in tax laws and adjust as needed. 


 

Taking proactive steps before December 31st can make a significant difference in your tax situation. By reviewing your income and expenses, maximizing retirement contributions, planning charitable donations, and consulting with a CPA, you can reduce your tax liability and set yourself up for financial success in the new year.


Don’t wait until the last minute—start your year-end tax planning today to ensure you’re prepared for tax season. 


Need help with your year-end tax planning? Contact Indiva Advisors by sending an email to info@indivaadviors.com to schedule a free 30-minute consultation. 

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