17 Tips for End of Year Tax Planning

Posted by Madison on December 13, 2017

Now that we crossed off End of Year Credit Card Reimbursements on our to-do list, it’s time for end of year tax planning!

This is your annual reminder to get your financial house in order for tax season!

What could be more fun than taking a break from holiday festivities and shopping to start thinking about taxes? Does anyone else need a distraction from watching the Amazon Lightning Deals?

Tips for End of Year Tax Planning

It seems like every year when we do our taxes, there are a few things we wish we would have done in December to reduce our tax bill just a little more. Sound familiar?

That’s where a little end of year tax planning results in great rewards!

This year is a bit different with a possible new tax bill in the works, but most of the items on the list are for the tax year 2017.

Here’s an updated list of money moves to make before the new year.

Year End Tax Moves

  1. Run a preview. Before the end of the year run an estimate using Turbo Tax. If you wait until the new year, it’s often too late to go back and make changes. Start running projections now before the year end! We will also update our tax calculator shortly to help you with your projections.
  2. Bump up contributions to retirement plans. Contribute more to your 401k by the end of the year to reduce your taxable income and your tax bill.
  3. Plan for health insurance changes. The penalty for no health insurance goes up each year. If you qualify for the Health Insurance Premium Tax Credit here’s How to Claim the Health Insurance Premium Tax Credit on your tax return.
  4. Take your losses. Did you lose money on your investments? If so, you might as well sell them and take the capital loss. Commonly referred to as tax loss harvesting, losses (that exceed gains) are capped at $3,000, but you can carry them forward into future tax years. To understand why you might do this, here are 3 Benefits of Tax Loss Harvesting.
  5. Take your gains. Once again, you can pay 0% long term capital gains if you are in the 10% or 15% tax bracket. If you are planning to sell, you might as well do it before year end if you fall in this tax bracket!
  6. Review investment tax rules. Don’t forget about the 3.8% Investment Tax on investment income, including capital gains and dividends, that kicks in for high income filers. If you are subject to the investment tax pay close attention to your end of year strategy to realize gains and losses.
  7. Prepay your mortgage and real estate taxes. Even if your payments aren’t due until January, you can pay them in December to deduct this year, if you itemize. Should you pay this year or wait? For more information, see how to determine if you should accelerate your property tax deduction into the current year.
  8. Give away your money. If you were planning to give a lot of money to someone special, utilize your annual gift exclusion of $14,000. More than that and you are subject to the gift tax.
  9. Use your flex spending money. The use-it-or-lose it rule makes your money disappear if you don’t use it. Check your plan for the deadline to incur costs and submit reimbursement requests. If you don’t know what to spend your money on, see the list of ways to use all of your flex spending account. It’s also a good time to remember to enroll in your 2018 flexible spending account if you haven’t done so already. The $2,650 flex spending plan limit will increase for 2018.
  10. Donate. We all know we can donate clothes, books, and household stuff to Goodwill. But dig deeper and you might be able to find more ways to make a charitable donation. For example, I like to remind newlyweds that you can donate wedding dresses and attire to take a tax deduction. Be sure to research the charity to make sure you know how your donations will be used.
  11. Finalize your records. If you plan to deduct mileage on your personal car make sure your mileage logs are complete. Remember you will save yourself time by being organized! Review how long you need to keep your paperwork before throwing out any records.
  12. Review your checklist. I keep an end of year tax planning and finance checklist. The checklist comes in handy to determine what needs to be done each year to keep our finances in order. If you don’t have an annual list, now is a great time to make one. Just write everything down as you go.
  13. Make 529 plan contributions. If your state has a deduction for 529 plan contributions, make your contribution before year end.
  14. Do an AMT analysis. If there’s a chance that you will be subject to AMT, analyze your deductions to see if you are better off waiting to make some of the above moves.
  15. Close your IRA. While this one is very extreme, I keep it in the list to remind you to review the performance of your IRA. If you carefully evaluated the pros and cons, and decided to take a loss on an IRA, you must close your account before year end to claim your loss on your taxes this year.
  16. Fund your IRA. You have until the tax deadline to maximize your Roth IRA contributions. However, if you’re getting an end of year bonus, it might be a good time to stash it away!
  17. Convert your IRAs. After running our tax estimates, I determine if it makes sense to make a Roth IRA Conversion. If you need to make one, don’t forget it needs to be done by the end of the year. In addition, if you are planning to use the Backdoor Roth IRA strategy this year, you also need to determine if you want to make your conversion by the end of the year.

Determine if You Need to Pay Tax or File

Finally, after you’ve reviewed all the end of year planning, review the requirements for filing and paying taxes. Finding out in April that you need to pay tax on unemployment, you made over the minimum income to file taxes, your kids need to file taxes or that your social security benefits are taxable aren’t usually welcome surprises. Do yourself a favor and review the requirements before the end of the year.

What additional moves are you planning to make for 2017 end of year tax planning?

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Comments to 17 Tips for End of Year Tax Planning

  1. Great list of ideas! I need to get working on my taxes.


  2. Now is the time I start getting everything together for my taxes. This will be a very helpful checklist.


  3. thanks. this kind of helps. something more helpful would be what is due when. some stuff can be done up until 4/15, like ira contributions. but it looks like 529 contributions need to be done by year end? wish there was a list specifying this..


  4. This is a nice comprehensive list. I would also recommend to pay any college tuition for the upcoming semester by the end of the month, and to take care of any medical issues by the end of the month if it will help bump your total expenses over the 7.5% of AGI floor for deduction purposes. I especially agree with getting all of the documents organized. Organization is a big key in making sure that everything is covered and enables you to be an early filer.

    The IRA contributions can be claimed up until the ordinary deadline for the current filing year, which this year is April 15th (filing an extension does not extend the ability to contribute to an IRA). Sometimes the deadline gets pushed back depending on what day the 15th falls, as it did in 2007, when April 15th was a Sunday, but April 16th was a federal holiday so the filing deadline became the 17th of April. Regarding the 529 plans, a Coverdell ESA plan shares the same deadline as the IRA but any other 529 plans have their own rules in place (I believe) for many features.

    Eric J. Nisall

  5. Nice article. Although I am not sure I want to take my losses and I think I already gave all of my money to my financial advisor.

    Galen Ramsden

  6. I think it is an awesome time to get started on taxes. I always wait too long and then scramble in April!

    Mrs. Money

  7. Good list to start from and helps organize all the tax stuff. Also good time to review your 401k asset allocation and 401k contributions. (At least once a year)


  8. That’s a pretty thorough list, thanks for sharing. 🙂


  9. I should investigate my flex benefits to see what I may be missing. No one in the HR department at my work seems to know much about the benefit plan and the employee hand book isn’t much help either. Thanks for the reminder.

    Jane Savers

  10. I went through our charitable giving and made sure we have given all we plan to give this year. I also made sure we have receipts for everything.

    Bryce @ Save and Conquer

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