10 Year-End Tax Strategies to Prepare for Next Tax Season

As the year winds down, December offers a valuable opportunity to get ahead of tax season. A little planning now can help you maximize deductions, avoid surprises, and start the new year feeling organized and confident.

Here are ten smart end of the year, tax strategies to consider.

1. Review Your Withholding and Estimated Payments

If you experienced major income changes this year like a job switch, raise, or additional freelance work, now is the time to review your tax withholding. Adjusting your W-4 or making a final estimated tax payment can help you avoid penalties and ensure you’re on track for April.

2. Boost Your Retirement Contributions

December is the last month to increase contributions to employer-sponsored retirement plans like 401(k)s and 403(b)s. Increasing your deferral rate, even by a small amount, may reduce taxable income and enhance long-term savings. Contributions to IRAs are allowed up until the tax filing deadline – April 15^th of the following year.

3. Use Up Flexible Spending Account Balances

If you have an FSA, check your remaining balance. Many plans follow a “use it or lose it” rule, meaning unused dollars may disappear at year-end. Consider scheduling medical, dental, or vision appointments or stocking up on eligible health items before December 31^st.

4. Make Charitable Contributions

Charitable gifts made by December 31^st will count toward this year’s tax deduction. It's important to keep good records whether you give money, household goods, or stocks that have gained value. Donating appreciated investments is often a smart tax move since it lets you bypass capital gains taxes.

5. Start Organizing Your Records

Get ahead by gathering the documents and receipts you’ll need to file your return. This includes income forms (W-2s, 1099s), investment statements, property tax bills, charitable receipts, and business or gig-work expenses. Setting up a dedicated folder can make tax season far less stressful.

6. Evaluate Whether to Itemize Deductions

If your potential itemized deductions are close to the standard deduction threshold, consider strategies like prepaying certain expenses or increasing charitable contributions this month. “Bunching” deductions can help you surpass the threshold and boost your tax savings.

7. Perform Year-End Investment Housekeeping

Review any capital gains or losses in your portfolio. You may benefit from tax-loss harvesting (selling underperforming investments to offset gains) or from understanding any year-end distributions from mutual funds. A quick portfolio review can help minimize tax surprises.

8. Prepay Deductible Expenses Where Appropriate

Most people report taxes using the cash basis, so expenses are deductible when paid. Paying bills like mortgages, state tax estimates, or medical costs in December can speed up deductions, but be aware of SALT deduction limits.

9. Review Your Business or Self-Employment Finances

If you run a small business or earn self-employment income, December is a key month for year-end planning. Consider purchasing necessary equipment, organizing receipts, tracking mileage, and evaluating retirement plan options like SEP IRAs or solo 401(k)s. Clean, accurate bookkeeping now will simplify your filing later.

10. Schedule a Year-End Check-In with Your Tax Advisor

A brief conversation with your VAAS Tax Professional before December 31^st can uncover last-minute opportunities and clarify your expected tax position. This can help you fine-tune withholding, plan for payments, and take adv`antage of any remaining tax-saving strategies.