Year-End Tax Planning Strategies to Maximize Your Savings

The final quarter of the year is critical for tax planning. Once December 31st passes, most tax-saving opportunities for the current year disappear. At Monarch Tax and Advisory, LLC, we help clients proactively manage their tax strategies throughout the year, with special focus on year-end planning to minimize tax liability and set up success for filing season.

Here are key strategies to consider before year-end.

For Business Owners

Maximize retirement contributions - High-wage earners should evaluate catch-up contribution opportunities, as tax laws continue to evolve around retirement deferrals.

Investigate SEP or Solo 401(k) options - These retirement plans must be established before year-end to take advantage of employee contribution portions, though employer contributions can typically be made until the tax filing deadline.

Time equipment purchases strategically - If major equipment needs replacement, coordinate the timing to optimize depreciation deductions and minimize your tax bill.

Clean up your books - Well-organized financial records not only reduce tax preparation time and costs but also help identify additional deductions and prevent errors that could trigger audits.

Maximize HSA contributions - Contribution limits are $4,300 for self-only coverage or $8,550 for family coverage, plus an additional $1,000 if you're 55 or older.

For S-Corporation Owners

Properly report health insurance - Ensure health insurance premiums are correctly reported in Box 1 of your W-2 to secure your self-employed health insurance deduction.

Establish an accountable plan - Set up this plan before year-end to properly deduct home office expenses and other business costs.

Address estimated tax shortfalls - If you've fallen behind on estimated payments, implement payroll strategies to catch up and avoid penalties.

Review W-2 compensation - S-Corp owners must take reasonable compensation. Too low puts you at audit risk; too high costs unnecessary payroll taxes.

For Partnerships and S-Corps in Colorado

Consider the Colorado SALT Parity election - This powerful strategy converts your state tax payment into a federal business deduction, potentially saving significant federal tax dollars.

For Investors and Real Estate Owners

Plan capital gains and losses - Coordinate gain recognition with loss harvesting opportunities to minimize overall tax impact.

Explore cost segregation studies - With bonus depreciation rules changing, cost segregation can accelerate depreciation deductions on real estate investments and significantly reduce current-year tax liability.

For W-2 Employees

Review withholding after job changes - Changing employers mid-year can create withholding issues. Review your year-to-date withholding to avoid surprises at tax time.

Coordinate investment tax planning - Work with your financial advisor on strategic gain or loss harvesting before year-end.

Maximize HSA contributions - Contribution limits are $4,300 for self-only coverage or $8,550 for family coverage, plus an additional $1,000 if you're 55 or older.

Maximize retirement contributions - Take advantage of catch-up contributions, and if you're age 60-63, don't forget about the super 401(k) catch-up provisions.

For Retirees

Manage required minimum distributions (RMDs) - If your RMDs create unwanted taxable income, explore charitable giving strategies such as qualified charitable distributions (QCDs) or bunching charitable donations.

Why Year-End Planning Matters

Tax laws continue to evolve, with changes affecting retirement contributions, depreciation rules, and deduction limits. Proactive year-end planning ensures you take advantage of every available tax-saving opportunity while avoiding costly mistakes. The strategies you implement before December 31st can significantly impact your tax liability and set you up for a smoother filing season.