How to Reduce Your Taxes Before the End of the Year
Nobody wants to pay more in taxes than they have to. The good news is that there are real steps you can take before December 31 to lower your tax bill. You do not need to wait until tax season to act. Many of the best tax-saving moves happen before the year ends.
Whether you are a business owner, a freelancer, or a salaried employee, this guide will walk you through practical strategies to reduce your taxes. These are not loopholes. These are legal, proven methods that a qualified accountant can help you use.
Key Takeaways
- Max out your retirement contributions before December 31
- Harvest investment losses to offset your gains
- Bunch your deductions if you are close to the standard deduction threshold
- Defer income to next year if your tax bracket allows it
- Make charitable donations before the year ends
- Business owners can prepay expenses to reduce taxable income
- Work with a licensed accountant to find deductions you may be missing
Retirement Contributions and Tax-Deferred Accounts
One of the easiest ways to reduce your taxes is to put more money into tax-deferred retirement accounts. Every dollar you contribute to a traditional 401(k) or IRA reduces your taxable income for the year.
For 2024, you can contribute up to $23,000 to a 401(k) if you are under 50. If you are 50 or older, the limit goes up to $30,500. For a traditional IRA, the limit is $7,000, or $8,000 if you are 50 or older.
Health Savings Accounts (HSAs)
If you have a high-deductible health plan, you can also contribute to a Health Savings Account. HSA contributions are tax-deductible. The money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. For 2024, individuals can contribute up to $4,150 and families up to $8,300.
Maxing out these accounts before year-end is one of the most direct answers to “how to reduce my taxes” without changing your lifestyle much.
Investment Strategies That Lower Your Tax Bill
If you have investments in a taxable brokerage account, you may have more control over your taxes than you think. One common strategy is called tax-loss harvesting.
This means selling investments that have lost value to offset gains you made on other investments. For example, if you made $5,000 on one stock but lost $3,000 on another, you can sell the losing position to bring your taxable gain down to $2,000.
Avoid the Wash-Sale Rule
Be careful here. The IRS has a wash-sale rule that says you cannot buy back the same or a “substantially identical” investment within 30 days before or after the sale. If you do, you lose the tax benefit. An accountant can help you navigate this correctly.
Also, if your income is low enough, you may qualify for a 0% capital gains tax rate. For 2024, that rate applies to single filers with taxable income up to $47,025 and married couples filing jointly up to $94,050.
Deductions, Donations, and Business Expenses
Itemizing deductions is another way to reduce your taxes, but it only helps if your total deductions exceed the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.
If you are close to those thresholds, you can “bunch” two years of deductions into one tax year. This could include property taxes, mortgage interest, and charitable contributions.
Charitable Giving Before December 31
Cash donations to qualified charities are deductible if you itemize. You can also donate appreciated stock directly to a charity. This way, you avoid paying capital gains tax on the gain, and you still get a deduction for the full market value of the stock.
For business owners, prepaying deductible expenses before year-end can reduce your taxable income. This includes things like office supplies, subscriptions, insurance premiums, and even certain equipment purchases under Section 179 of the tax code. Maximizing tax deductions for small businesses is one of the most effective ways to lower what you owe.
Section 179 Deductions for Business Owners
Under Section 179, businesses can deduct the full cost of qualifying equipment and software purchased and placed in service during the tax year. The 2024 limit is $1,220,000. This is a powerful tool if you were planning to buy equipment anyway.
Frequently Asked Questions
What is the easiest way to reduce my taxes before the end of the year?
The fastest move is to max out your retirement contributions. Every dollar you put into a traditional 401(k) or IRA reduces your taxable income. If you have not hit the annual limit yet, now is the time to increase your contributions.
Can I still make IRA contributions after December 31?
Yes. You have until the tax filing deadline, usually April 15, to make IRA contributions for the prior year. However, 401(k) contributions must be made by December 31. Learn more about essential steps for year end tax filing to make sure you are fully prepared.
Should I defer income to next year to lower my taxes?
It depends on your situation. If you expect to be in a lower tax bracket next year, deferring income can help. If you expect a higher income next year, deferring may not be the right move. Talk to an accountant before making this decision.
Are charitable donations always tax-deductible?
Only if you itemize your deductions and donate to a qualified organization. You cannot deduct donations to individuals, political candidates, or non-qualifying organizations. Keep your receipts and donation letters as proof.
How can a tax professional help me reduce my taxes?
A licensed accountant can review your full financial picture and find deductions or credits you may be missing. They can also help you plan ahead so you are not scrambling at the last minute every year. Understanding the difference between tax planning vs tax preparation is a good first step toward a smarter year-round approach.
Work With BJM Group to Lower Your Tax Bill
There is no reason to overpay your taxes. The strategies above are all legal and available to most taxpayers, but knowing which ones apply to your specific situation takes experience.
BJM Group works with individuals and business owners across the United States to build smart, year-round tax planning and preparation strategies. The team knows the tax code and knows how to find savings that are easy to miss on your own.
Do not wait until April to think about your taxes. Contact BJM Group today at bjmgroup.com and find out how much you could save before the year is over.