Five tax moves to make before December 31

By the time you sit down to file in the spring, most of the decisions that shaped your bill have already been made. The fall is when there is still room to move. These are the five things we look at with every client before the year closes.

1. Check your withholding or estimated payments

Underpaying through the year means penalties on top of the tax. Overpaying means an interest-free loan to the government. Compare what has been paid so far against a projection of the full year, and adjust the last payment or your withholding for the final pay periods.

2. Fund retirement accounts

Contributions to a workplace plan generally have to be made by December 31 to count for the year. Some accounts, like a traditional IRA, allow contributions up to the filing deadline. Self-employed people have additional options, such as a SEP or solo 401(k), with their own limits and deadlines. Which account is right depends on your income and whether you have employees.

3. Time equipment purchases

If your business needs equipment, vehicles, or software, buying and placing them in service before year end can move the deduction into this year. The rules on how much can be deducted immediately versus over several years change periodically, so confirm the current treatment before spending money you would not otherwise spend.

4. Bunch deductions where it helps

If your itemized deductions are close to the standard deduction, concentrating two years of charitable giving or other deductible expenses into one year can push you over the line in that year while you take the standard deduction in the other. This only works when the totals are close, which is why it is a calculation, not a rule.

5. Review your business structure for next year

If your profit has grown, this is the time to decide whether an S-Corp election makes sense for next year, whether payroll needs to start, and whether your books are clean enough to support the decision. Elections and setups take time, and January arrives quickly.

None of these moves are exotic, but each one requires looking at your numbers before the year ends rather than after. That is what tax planning is: a short review in the fall that changes what you owe in the spring.