December rolls around faster than we expect, bringing with it the whirlwind of holiday preparations and end-of-year obligations. 

December is also the final sprint in the financial race of the year—a period where smart decisions can put real money back into your pocket. 

While everyone else is immersed in holiday cheer, you have the opportunity to outsmart the taxman and set yourself up for a stronger financial start in the new year.

According to the IRS, over $1 billion in tax refunds remain unclaimed because people haven’t filed their 2020 tax refund yet, leaving billions of dollars on the table. That’s not insignificant—it’s money that could be padding your wallet instead of sitting in Uncle Sam’s coffers.

Why does this happen? Because most people think tax planning is something you do in April. 

Spoiler alert: By then, it’s too late. The IRS isn’t forgiving, but it is predictable. The tax code is filled with opportunities for those who know how to navigate it before December 31st.

In this guide, we’re providing actionable tax strategies you can implement immediately. We’re talking real tips that can save you thousands—not next year, not someday— right now.

So ask yourself: Do you want to be the person who looks back and wonders where all your money went? Or do you want to take control, make savvy decisions, and invest in your own financial well-being?

If you’re ready to seize these December financial opportunities, let’s dive in!

1. Maximize Retirement Account Contributions

Retirement may feel like a distant priority, but December is a golden opportunity to get real about your future—and score some serious tax benefits along the way. The tax code favors those who plan ahead, and maximizing retirement contributions now can mean major tax savings when April rolls around.

401(k) Contributions

If you’re employed and have a 401(k), increasing your contributions before December 31 can make a tangible impact on both your tax bill and retirement fund. 

The IRS is allowing individuals to contribute up to $23,000 in 2024. If you’re 50 or older, that number jumps to $30,500 with an additional $7,500 in catch-up contributions.

Why max it out? For every dollar contributed to a traditional 401(k), your taxable income decreases by that amount. 

Let’s say you earn $80,000 annually and increase your 401(k) contribution by just $2,000. That’s $2,000 you won’t pay taxes on this year, potentially saving you hundreds of dollars come tax time, while also growing your retirement fund tax-deferred.

Here’s how to make the most of your 401(k) by year-end:

  • Check your contribution status: Log into your retirement account or talk to HR to see how close you are to the contribution cap. Many people assume they’re contributing enough but fall short of the annual limit without realizing it.
  • Adjust payroll deductions: Increase your contribution rate for your remaining paychecks to get as close to the limit as possible. Even small adjustments can make a big difference.

Individual Retirement Accounts (IRAs): Traditional vs. Roth

If you don’t have access to a 401(k) or have room to save more, IRAs offer another tax-savvy way to build your retirement savings.

Contribution limits for 2024: The IRS allows individuals to contribute up to $7,000 to an IRA in 2024. Those 50 and older can contribute an additional $1,000, for a total of $8,000.

Traditional IRA: Contributions to a Traditional IRA may be tax-deductible, which reduces your taxable income for the year. Deductibility depends on your income and whether you’re covered by a retirement plan at work. Even if you don’t qualify for a full deduction, a partial deduction could still reduce your tax bill.

Roth IRA: Roth IRA contributions are made with after-tax dollars, which means there’s no tax deduction now. But the advantage? Your contributions and earnings grow tax-free, and qualified withdrawals in retirement are also tax-free. Keep in mind that Roth IRAs have income limits, so eligibility varies.

While contributions to a 401(k) must be made by December 31, you have until April 15, 2025 to make contributions to an IRA for the 2024 tax year. This means you have a bit more flexibility if cash flow is tight in December.

But remember, the sooner you contribute, the sooner your money can start growing. 

Self-Employed Retirement Plans

If you’re self-employed or run a small business, you have additional retirement options with substantial contribution limits that can both reduce taxable income and help secure your future.

SEP IRA (Simplified Employee Pension): Self-employed individuals can contribute not more than 25% of their net earnings to a SEP IRA, with a maximum of $69,000 in 2024. Contributions are tax-deductible, lowering taxable income significantly, especially if you’re a high earner.

Solo 401(k): This plan allows you to make contributions both as an employee and employer, with a total contribution limit of $69,000 (or $76,500 with catch-up contributions for those 50 and older). The Solo 401(k) provides flexibility, letting you adjust contributions based on your business income for the year.

To make the most of these options, keep in mind:

  • Account setup by December 31: For SEP IRAs and Solo 401(k)s, the account must generally be established by year-end to make contributions for 2024, although contributions can be made until your tax filing deadline.
  • Seek professional guidance: Self-employed retirement plans come with specific rules and nuances. Consulting with a tax professional can ensure you maximize benefits without running afoul of IRS regulations.

2. Harvest Investment Losses

It’s been a volatile year for the markets, and while losses are never fun, they can actually work to your advantage come tax season. The strategy? Tax-loss harvesting—selling underperforming investments to offset capital gains and reduce your taxable income.

The principle behind tax-loss harvesting is straightforward: Sell investments that have lost value to offset the gains from your portfolio’s winners. 

The IRS allows you to offset capital gains with capital losses, and if your losses exceed your gains, you can deduct up to $3,000 of the remaining loss against other income. 

Losses beyond $3,000? You can carry them forward to future tax years.

Here’s how to do this effectively:

Identify underperforming assets: Look at your portfolio for investments that have consistently lost value and no longer fit your financial goals. Selling these assets now can create a tax-deductible loss while also cleaning up your portfolio.

Watch out for the wash-sale rule: The IRS has rules to prevent people from selling at a loss and then buying the same investment right back. The wash-sale rule prohibits you from repurchasing the same or a “substantially identical” investment within 30 days of the sale if you want to claim the loss. To avoid issues, wait 31 days before reinvesting or consider buying a similar but not identical asset during the waiting period.

Balance short-term vs. long-term gains: Short-term gains (from assets held less than a year) are taxed at your regular income tax rate, while long-term gains (held over a year) are taxed at lower rates. Prioritize offsetting short-term gains with losses to maximize the tax savings.

Portfolio Rebalancing Opportunities

End-of-year is an ideal time for portfolio rebalancing, which can serve multiple purposes. Rebalancing allows you to sell assets in a high-risk category and reinvest in assets that better fit your risk tolerance and financial outlook for the new year.

Just because an asset has dropped doesn’t mean it’s time to let it go. Consider the potential for rebound in 2025 before deciding to sell. Tax benefits are great, but not if you’re selling an asset that could recover strongly in the future.

Tax-loss harvesting isn’t a one-time fix; it’s an ongoing strategy. Building this into your year-end routine ensures your portfolio stays efficient for tax purposes and aligned with your financial plan.

3. Charitable Giving

When it comes to end-of-year tax strategies, charitable giving not only supports causes you care about but also offers meaningful tax savings. December is prime time for charitable donations, and the IRS rewards those who give back with tax deductions that can reduce taxable income—if you know how to make the most of it.

Cash Donations

Cash donations are straightforward, and if you itemize your deductions, you can generally deduct up to 60% of your adjusted gross income (AGI) for these contributions.

Here’s how to get the most out of a cash donation:

Choose qualified organizations: Only donations to IRS-qualified organizations are eligible for tax deductions. Use the IRS Tax Exempt Organization Search tool to confirm eligibility.

Get a receipt: For any donation over $250, you’ll need a receipt or acknowledgment from the organization that details the amount and the date. For smaller donations, a bank record or credit card statement will suffice.

Donating Appreciated Assets

Donating appreciated assets, such as stocks or mutual funds, can offer a twofold benefit: you avoid capital gains tax on the appreciated value, and you receive a charitable deduction for the asset’s fair market value.

Let’s say you bought stock for $1,000 that’s now worth $5,000. Selling it would trigger a capital gain tax on the $4,000 profit. But by donating the stock directly, you avoid paying capital gains tax and still get a $5,000 deduction. If you’re in the 24% tax bracket, that could mean a tax savings of $1,200.

How to make this work for you:

  • Select long-term investments: Only assets held for over a year qualify for fair market value deductions. Short-term investments are deductible only up to the amount you initially paid.
  • Check processing times: Stock transfers can take a few days to complete, so plan your donations early in December to meet the year-end deadline.

Qualified Charitable Distributions (QCDs)

If you’re 70½ or older and have a traditional IRA, you have another option: the Qualified Charitable Distribution. 

QCDs allow you to transfer up to $100,000 directly from your IRA to a qualified charity. This distribution counts toward your required minimum distribution (RMD) but isn’t counted as taxable income, which can be a big win for retirees aiming to reduce their tax burden.

The benefits of QCDs:

  • Avoid Tax on RMDs: For retirees who don’t need their full RMD for income, a QCD satisfies the requirement without increasing taxable income.
  • Simplify deductions: Since QCDs don’t require itemizing, they’re available to anyone, including taxpayers who take the standard deduction.

With the higher standard deduction introduced by the Tax Cuts and Jobs Act, fewer taxpayers are itemizing. 

To overcome this, consider “bundling” or “bunching” donations. This strategy involves making multiple years’ worth of donations in a single year to exceed the standard deduction threshold, allowing you to itemize for that year.

For example, if you typically donate $5,000 per year, try donating $10,000 every other year instead. This way, you might clear the itemization threshold in certain years, maximizing the deduction.

4. Review and Adjust Tax Withholding

Another easy way to avoid a surprise tax bill in April is to review your tax withholding before the year ends. Many people set their withholding once and forget about it, which can lead to over- or under-paying throughout the year. 

A quick check-in now could mean fewer headaches—and potentially more money in your pocket—when tax season rolls around.

If you’re withholding too little, you may face a hefty tax bill and possible penalties come April. If you’re withholding too much, you’re essentially giving the IRS an interest-free loan. According to the IRS, the average tax refund in 2024 has been over $3,011—money that could have been in your pocket all along.

W-4 Form Adjustments

The W-4 form determines how much tax is withheld from each paycheck. Adjusting it can help you hit that sweet spot where you neither owe a huge tax bill nor receive an excessively large refund. 

Here’s how to get started:

  • Use the IRS tax withholding estimator: This tool is available on the IRS website and can provide you with a more accurate picture of whether you’re on track or need to adjust.
  • Calculate adjustments: If the estimator shows you’re withholding too much, reduce your withholding by updating your W-4 with your employer. If you’re withholding too little, consider increasing your withholding to avoid penalties.
  • Double-check major life changes: Get married, have a baby, or switch jobs this year? These events can significantly impact your tax liability and might require an update to your W-4.

5. Utilize Flexible Spending Accounts (FSAs)

If you have a Flexible Spending Account (FSA) for healthcare or dependent care expenses, now is the time to utilize it well. 

FSAs come with a “use-it-or-lose-it” rule, meaning that unused funds don’t roll over into the next year and may be forfeited.

The Use-It-Or-Lose-It Rule

The IRS permits FSA contributions up to $3,200 for healthcare and $5,000 for dependent care in 2024. These contributions are deducted from your paycheck pre-tax, reducing your taxable income. 

However, if you don’t use the funds by the deadline, any remaining balance typically gets forfeited.

Many FSAs also have grace periods or carryover options that allow some flexibility.

Smart Moves for Last-Minute FSA Spending

If you’re running out of time to spend down your FSA funds, consider these strategies:

  • Schedule checkups or appointments: December is a high-demand month for healthcare providers, so book any necessary appointments as soon as possible.   
  • Stock up on essentials: Purchase items like contact lens solution, sunscreen, bandages, and other eligible products you know you’ll use in the coming months.
  • Invest in health: Consider wellness expenses like a visit to a chiropractor, acupuncture session, or physical therapy if it’s eligible under your plan.

For most people, FSAs are a valuable but often overlooked tax-saving tool. With a little planning, you can get the full benefit of your contributions and ensure you don’t let any of those pre-tax dollars go to waste.

6. Energy Efficiency Credits

With rising energy costs and growing environmental awareness, investing in energy-efficient home improvements not only benefits the planet but can also lead to substantial tax savings. 

The IRS offers tax credits for homeowners who make energy-efficient upgrades, providing a way to reduce both your energy bills and tax liability. 

Manage Required Minimum Distributions (RMDs)

If you’re 73 or older, the IRS requires you to take Required Minimum Distributions (RMDs) from traditional IRAs, 401(k)s, and other tax-deferred retirement accounts before December 31 each year. 

Missing this deadline isn’t a minor slip—it’s a costly mistake that can trigger a steep penalty. 

The Consequences of Missing an RMD 

Failing to take your full RMD can result in a 25% penalty on the amount not withdrawn. For example, if you’re required to take a $10,000 distribution and miss the deadline, you could owe the IRS a $2,500 penalty. This makes RMDs one of the most high-stakes elements of retirement planning.

How to Calculate Your RMD

The amount of your RMD is calculated based on your account balance as of December 31 of the previous year and your life expectancy factor, which the IRS updates periodically. 

Most brokerage firms and financial advisors can provide this calculation for you, but here’s a quick overview of the basic steps:

  • Check your account balances: Look at your IRA, 401(k), and other retirement account balances as of December 31, 2023.
  • Use the life expectancy factor: The IRS publishes a Uniform Lifetime Table with factors based on age. Divide your account balance by the life expectancy factor for your age to determine the required distribution.

For example, if you’re 75 years old with a balance of $500,000 in an IRA, and the life expectancy factor for age 75 is 22.9, your RMD would be approximately $21,834 ($500,000 ÷ 22.9).

Don’t Forget RMDs from Inherited IRAs

If you’ve inherited an IRA, you may have to take RMDs from that account as well, even if you’re under the age of 73. The rules vary depending on when the account holder passed away and your relationship to them, so consult with a tax advisor to understand the specific requirements.

7. Review Investment Portfolio for Dividends and Capital Gains

As the year winds down, take a close look at your investment portfolio to see how dividends and capital gains will impact your tax bill. 

Certain actions—timing the sale of investments or strategically handling dividends—can make a significant difference in what you’ll owe the IRS. 

Mutual Fund Distributions

If you hold mutual funds in a taxable account, you may be in for an unwelcome surprise at tax time. 

Mutual funds distribute dividends and capital gains at the end of the year, even if you didn’t sell any shares. These distributions can lead to unexpected tax liabilities if not managed carefully.

To tackle this;

  • Check distribution schedules: Most mutual funds announce their distribution schedule in early December. This gives you a heads-up on the size of any capital gain distributions. 
  • Avoid buying right before distributions: If you buy mutual fund shares in December just before they pay out distributions, you’ll be taxed on gains that were accrued before you even invested. This can lead to a tax hit on money you never saw, which can be frustrating.
  • Consider selling shares before year-end: If you’re planning to sell mutual fund shares, doing so before distributions are paid can help you avoid being taxed on the distribution, especially if you’re planning to rebalance your portfolio anyway.

Qualified Dividends vs. Ordinary Dividends

Not all dividends are created equal when it comes to taxes. Qualified dividends are taxed at the lower capital gains rate, while ordinary dividends are taxed as regular income. Knowing which type you’re receiving can influence your year-end decisions.

  • Qualified dividends: To qualify for the lower tax rate, dividends must meet certain IRS criteria, such as being held for a specific period. Qualified dividends are taxed at 0%, 15%, or 20%, depending on your income bracket.
  • Ordinary dividends: These dividends are taxed as ordinary income, which can be up to 37% for high earners. If you receive a large amount of ordinary dividends, consider ways to reduce your taxable income in other areas to offset the impact.

Review your 1099-DIV forms or your brokerage statements to see what types of dividends you’re receiving. Understanding the tax implications can help you decide whether to hold onto certain stocks or make adjustments to your portfolio.

Conclusion

Each of these tax moves is a way to make the most of what you’ve earned, so you can keep more of it in your pocket.

The IRS isn’t going to remind you to adjust your withholdings or tell you to max out your retirement account. The responsibility to act is on you, but the payoff can be huge. 

Every decision you make now–from using up your FSA funds to making charitable donations–can have real, immediate impact, saving you money today and building a more secure tomorrow.

And it doesn’t have to be overwhelming. Pick a few strategies that make sense for your situation. Maybe it’s as simple as contributing more to your 401(k) or taking a moment to confirm your RMDs. Or maybe you’ll dig into your investments, harvest some losses, or start that gift-giving strategy you’ve been meaning to try.

The bottom line? Small moves add up. The tax code may be complicated, but these strategies don’t have to be. December is your last chance to make a difference in what you’ll owe, and a little action now can mean thousands saved come April.

So take a few minutes, make those adjustments, and close out the year on your own terms. The benefits are real, and they’re waiting if you’re ready to take them.