Year End Tax Planning Checklist: Moves to Review Before December 31
Many tax decisions have to be made before December 31 to count for the year. Once the calendar turns, options like harvesting losses, completing a Roth conversion, or taking a required distribution are generally closed for that tax year. Year end tax planning is the window to review what has happened so far and make adjustments while they still matter.
This checklist covers year end tax moves worth reviewing for individuals, retirees, investors, and business owners. Not every item will apply to you, and some may not make sense in your situation, but walking through the list with your advisors can help you avoid surprises in April.
Start Here: A Complimentary Year-End Wealth and Tax Review
The best time to start is in the fall, while there is still time to act. Compound offers a complimentary, no-obligation wealth and tax review that may include:
A year-to-date tax projection: estimated income, deductions, and tax owed
Your portfolio: realized and unrealized gains and losses
Retirement accounts: required distributions, contributions, and conversion opportunities
Business activity: profit expectations, equipment purchases, and payroll decisions
Why Proactive Tax Planning Beats Year-End Scrambling
Proactive tax planning looks at your income and decisions throughout the year and across multiple years. A year-end review is the last checkpoint, not the whole plan. Families who wait until December often have fewer choices than those who review projections in the summer or early fall. A projection that compares this year with next year can show whether it makes sense to accelerate income, defer deductions, or do the opposite. For example, a household expecting a large bonus or property sale next year may want to handle certain items differently than one expecting retirement or a business slowdown. Read more about how to compare tax planning firms in Wisconsin.
Year End Tax Planning Checklist: Investments
Review realized gains and losses. Know where you stand before making more trades.
Consider tax loss harvesting. Selling positions with losses may offset gains. Watch the wash sale rule when reinvesting.
Check fund distributions. Mutual funds often distribute capital gains late in the year. Buying a fund just before a distribution may create a taxable event without any gain to you.
Rebalance with taxes in mind. Rebalancing inside retirement accounts generally does not create current taxes.
Review asset location. Make sure tax-inefficient holdings are positioned where it makes sense.
Year-End Moves for Retirement Accounts
Take required minimum distributions. RMDs generally must be taken by December 31, with a special deadline for the first one. Missing an RMD can trigger penalties.
Evaluate a Roth conversion. Conversions must be completed by December 31 to count for the year. Lower-income years may be good candidates. See how to evaluate a pre-tax to Roth strategy.
Maximize workplace plan contributions. Annual limits apply, and contributions through payroll generally must be made by year end.
Note later deadlines. IRA and HSA contributions can often be made until the tax filing deadline, and some business retirement plans allow later funding.
Charitable Giving Before Year End
Give appreciated securities instead of cash when it makes sense.
Consider bunching several years of gifts into a donor advised fund.
Use qualified charitable distributions from IRAs if you are eligible, and request them early so custodians can process them in time.
Keep acknowledgment letters for every gift.
Year End Tax Moves for Business Owners
Project business income. A projection helps decide whether to accelerate expenses or defer income.
Time equipment purchases. Property generally must be placed in service by year end to be depreciated this year.
Review owner compensation. S corporation owners may want to confirm reasonable salary and payroll before year end.
Consider retirement plan design. Some plans must be established before year end, and others can be set up later. Our client accounting services can help keep year-end books accurate.
Plan for a pending sale. If a business sale is approaching, tax timing matters. See business tax planning in Wisconsin.
Household and Family Items
Check withholding and estimated payments to reduce the risk of underpayment penalties.
Use flexible spending account balances that may expire.
Make annual exclusion gifts to family members if part of your estate plan. Annual limits apply. Coordinate larger gifts with an estate attorney.
Contribute to a 529 plan. Wisconsin offers a state income tax deduction for certain 529 contributions, subject to limits and timing rules.
Year-End Is Also a Wealth Checkpoint
Year end tax planning is a natural time to step back and review your wealth plan as well: whether your portfolio allocation still fits your goals, whether cash reserves are adequate, and whether your estate documents and beneficiaries are current. Our sample personal financial plan checklist can help you organize the review.
To see how taxes saved and reinvested each year may compound over time, try the Compound calculator. Results are hypothetical and for illustration only.
Coordinated Year-End Planning in Wisconsin
Compound combines wealth management and tax planning and preparation, so investment and tax decisions are made with both in view. We work with individuals, families, and business owners throughout Wisconsin, including Milwaukee, Madison, Green Bay, Appleton, Racine, and Sheboygan, and in surrounding areas.
Do not wait until the last week of December. Request a complimentary year-end wealth and tax review.
Frequently Asked Questions
When should I start year end tax planning?
Ideally in the early fall, so there is time to run projections and act. Some moves, like Roth conversions and RMDs, must be completed by December 31.
What are the most common year end tax moves?
Common moves include tax loss harvesting, Roth conversions, taking RMDs, charitable gifts of appreciated stock, maximizing retirement contributions, and timing business expenses.
Can I still contribute to an IRA after December 31?
Often yes. IRA contributions can generally be made up to the tax filing deadline for the prior year. Workplace plan contributions through payroll usually must be made by year end.
What is proactive tax planning?
It is reviewing and projecting your taxes throughout the year, and across multiple years, so decisions are made before deadlines rather than after.
Do business owners need a separate year-end review?
It often helps, because business income, equipment purchases, payroll, and retirement plan decisions all affect the owner's personal return.
Compound is a registered investment adviser. Registration does not imply a certain level of skill or training. This article is for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. Tax laws are complex and subject to change. Strategies discussed may not be suitable for everyone, and there is no guarantee that any strategy will achieve its objectives or reduce taxes. Calculator results are hypothetical, are not guarantees of future results, and do not reflect any actual investment. Investing involves risk, including possible loss of principal. Diversification does not ensure a profit or protect against loss. Please consult your tax, legal, and financial professionals before acting on any information in this article. For more information, see Compound's Form ADV, available at adviserinfo.sec.gov.
About Compound Wealth
Tax planning often intersects with investment decisions, business ownership, retirement planning, and other financial considerations. Compound Wealth provides an integrated approach that combines tax planning, wealth management, accounting, and business transition services to help clients evaluate financial decisions from multiple perspectives as part of an ongoing planning process.
