How to Maximize Your Deductions Before Year-End
The final weeks of the year are the most effective time to reduce your tax bill. Smart planning now can increase your deductions, improve cash flow, and position you for a stronger start next year. Here are the key strategies to consider before December 31.
1. Make your final charitable contributions
Charitable giving is one of the most flexible year-end strategies. You can deduct cash donations, appreciated stock, and even household items in good condition. If you want more control, consider contributing to a Donor-Advised Fund (DAF). You get the deduction now and can grant funds later. Read more about DAFs here.
2. Prepay deductible expenses
If you itemize deductions, prepaying certain expenses can increase the benefit. This may include medical expenses that exceed 7.5 percent of your AGI, property taxes (subject to SALT limitations), or your January mortgage payment. Prepaying is especially valuable in high-income years.
3. Max out tax-advantaged accounts
Retirement contributions directly reduce taxable income if you contribute to a traditional 401(k) or 403(b). For 2026, the limit is $24,500 plus $8,000 catch-up if you are 50 or older. Don’t forget HSAs and FSAs, which offer some of the strongest tax benefits available.
4. Take advantage of business deductions
If you are self-employed, review your books before December 31. Deductible opportunities may include equipment purchases, software, professional development, home office expenses, and mileage. Consider timing major purchases this year if your income is higher than usual.
5. Harvest investment losses
Tax-loss harvesting allows you to sell investments at a loss to offset gains or reduce taxable income by up to $3,000. Be mindful of the wash-sale rule, which prevents repurchasing a substantially identical security within 30 days.
6. Check withholding and estimated taxes
Avoid penalties by ensuring you have met safe-harbor rules or paid enough estimated taxes. High earners often benefit from increasing year-end withholding rather than sending a separate estimated payment.
7. Review major life changes
Events like marriage, divorce, starting a business, having a child, or buying a home can create new deductions or credits. Reviewing your situation before year-end ensures you do not miss opportunities.
The Bottom Line
Year-end planning is one of the most effective ways to reduce your tax bill and strengthen your financial position. The key is acting before December 31.
If you want a personalized review of your deductions and a clear plan to optimize your tax strategy, you can schedule a consultation by clicking here or by visiting the Contact page.