Year-End Tax Checklist for Investors and High Earners

Why a year-end checklist matters

Year-end tax planning is not just for accountants. For investors and high earners, the last weeks of the year are often the single best window to make changes that materially affect this year’s tax bill and next year’s cash flow. In my practice, clients who review a targeted checklist in November or December typically pay less tax or avoid costly mistakes (missed deductions, wash‑sale traps, or incorrect RMD handling) than those who wait until filing season. This article gives practical, actionable steps you can complete before December 31 and points to authoritative resources to verify limits and rules.

Quick timeline

• Review and act on items with a firm deadline by December 31.
• Make retirement-plan and HSA contributions by employer plan rules or by December 31 for workplace plans; IRA contributions can often be made until the tax‑filing deadline (typically April) but making them pre‑year‑end fixes your taxable income for the current year. (Confirm current-year deadlines and limits at IRS.gov.)

Year-end checklist — high-impact actions

Below are prioritized items with the why, the how, and common pitfalls.

1. Max out or accelerate retirement contributions

• Why: Reduces taxable income and shelters future earnings.
• How: If your employer plan allows, increase elective deferrals to reach the annual limit. Also confirm employer match contributions are maximized (free money you should not leave on the table).
• Numbers: Contribution limits change annually; check current limits on IRS.gov (Retirement Plan and IRA Contribution Limits) before acting.
• Pitfall: Don’t forget after‑tax contribution options and catch‑up rules if you’re age‑eligible.
• Related reading: See our guide on understanding employer match to maximize free retirement money (https://finhelp.io/glossary/understanding-employer-match-how-to-maximize-free-retirement-money/).

1. Review Roth conversion opportunities

• Why: Converting traditional IRA/401(k) balances to Roth can be a tax‑efficient move in years when your taxable income is temporarily lower (e.g., lower business income, career transition).
• How: Model the tax cost of a conversion now versus projected future tax rates. Partial conversions spread tax impact.
• Pitfall: Converting into the wrong year or underestimating the tax bill can trigger higher marginal tax rates or phaseouts.
• Internal resource: Our Roth conversion roadmap (https://finhelp.io/glossary/roth-conversion-roadmap-when-and-how-to-convert-for-retirement/) offers a step‑by‑step approach.

1. Harvest tax losses and manage gains

• Why: Realized capital losses offset capital gains plus up to $3,000 of ordinary income per year; unused losses carry forward.
• How: Identify losers to sell to offset gains, then rebalance to target allocations. Track cost basis on securities with multiple purchase lots.
• Pitfall: Beware the IRS wash‑sale rule — buying a substantially identical security within 30 days before or after the sale disallows the loss (IRS Publication 550). Use non‑identical ETFs or wait 31 days.

1. Check for required minimum distributions (RMDs) and qualified charitable distributions (QCDs)

• Why: RMDs from traditional retirement accounts create taxable income. If you’re charitably inclined, a QCD can satisfy (part of) your RMD and exclude the distribution from taxable income.
• How: If eligible, initiate a QCD from your IRA to a qualified charity before year‑end.
• Pitfall: QCD rules are technical — confirm age and plan-type eligibility on IRS.gov and with your custodian (see IRS Pub 590‑B).

1. Optimize tax withholding and estimated payments

• Why: Underpayment can trigger penalties; overpayment is an interest‑free loan to the government.
• How: Recalculate your withholding using year‑to‑date income, bonuses, capital gains, and expected deductions. For self‑employed clients or those with significant investment income, adjust quarterly estimated taxes for the final payment of the year (typically January for the fourth quarter for some cases—confirm deadlines).
• Pitfall: Don’t rely on safe‑harbor rules without running the numbers; large capital gains late in the year can derail prior withholding estimates.

1. Review tax‑efficient asset location

• Why: Placing tax‑inefficient assets (taxable bonds, REITs) inside tax‑deferred accounts and tax‑efficient assets (index funds, municipal bonds) in taxable accounts can improve after‑tax returns.
• How: Run an asset‑location analysis and, if necessary, move new contributions or future purchases to the right account type. Consider potential tax on any account transfers.

1. Confirm state and local tax (SALT) planning

• Why: SALT rules and limitations (including the federal $10,000 SALT cap that still applies unless changed by Congress) affect itemization and deduction strategies.
• How: Review state-specific deductions, prepay allowable property or state taxes if that makes sense for your itemization in the current year.
• Pitfall: Prepayment only helps when it changes whether you itemize versus take the standard deduction.

1. Charitable giving — bunching, appreciated securities, and donor-advised funds (DAFs)

• Why: Bunching several years of giving into one year or donating appreciated securities produces larger itemized deductions and reduces taxable gains.
• How: Donate appreciated stock held over one year directly to charities to avoid capital gains and claim a deduction for fair market value (observe substantiation rules). Use a donor‑advised fund to bunch deductions while controlling timing of grants.
• Documentation: Keep receipts and contemporaneous acknowledgment from charities for gifts $250 or more (IRS rules).

1. Revisit estate‑planning documents and beneficiary designations

• Why: A year‑end review ensures beneficiary forms align with your estate plan, which governs tax treatment at death and avoids unintended consequences.
• How: Check account beneficiary designations, trust provisions, and titles on real estate. Coordinate with your estate attorney for any necessary amendments.

1. Health Savings Account (HSA) contributions and FSA use‑it or lose‑it rules

• Why: HSAs provide triple tax benefit when used for eligible medical expenses; FSAs may have a use‑it‑or‑lose‑it clause or limited carryover.
• How: Max out HSA contributions if eligible and spend down or file claims on FSAs where funds might expire.
• Numbers: Contribution limits change annually; confirm current limits at IRS.gov.

1. Check for AMT and Net Investment Income Tax (NIIT) exposure

• Why: High earners may trigger the Alternative Minimum Tax or the 3.8% NIIT (applies above statutory thresholds for investment income). These can change effective tax rates for certain strategies (e.g., municipal bond interest remains exempt from regular tax but can have AMT implications in specific cases).
• How: Run a projection including these taxes before making large year‑end decisions.

1. Document and organize records for tax filing

• Why: Good documentation shortens filing time, reduces errors, and supports positions in case of audit.
• How: Consolidate annual statements (1099‑B, 1099‑DIV, K‑1s), keep charitable acknowledgments, records of cost basis, and documentation for any large transactions or conversions.

Practical examples (real-world context)

• Loss harvesting: A client realized $50,000 of long‑term gains earlier in the year. In December, we sold $50,000 of shortfalls across several taxable accounts and reallocated into a diversified ETF that did not trigger a wash sale. The realized losses offset the gains and eliminated capital‑gains tax for that client that year.
• Roth conversion timing: During a sabbatical year with reduced W‑2 income, another client used partial Roth conversions to take advantage of lower marginal rates and reduced future RMD exposure.

Common mistakes to avoid

• Ignoring the wash‑sale rule when harvesting losses.
• Failing to document charitable gifts properly.
• Overlooking the effect of year‑end capital events (option exercises, property sales) on estimated tax payments.
• Assuming RMD rules and ages haven’t changed — verify current RMD rules and ages on IRS resources.

Tools and resources

• IRS Publication 550 — Investment Income and Expenses (wash sales and capital gains rules): https://www.irs.gov/pub/irs‑pdf/p550.pdf (IRS)
• IRS Retirement Plan and IRA Contribution Limits (confirm current-year limits): https://www.irs.gov/retirement‑plans/plan‑participant‑employee/retirement‑topics‑contribution‑limits (IRS)
• For charitable and QCD rules see IRS Publication 590‑B and the IRS QCD guidance (IRS)
• Consumer-facing guidance on tax planning: ConsumerFinance.gov provides general planning tips.

Internal resources for deeper reading

• Roth conversion strategies: Roth conversion roadmap (https://finhelp.io/glossary/roth-conversion-roadmap-when-and-how-to-convert-for-retirement/).
• Consolidating retirement accounts safely: How to consolidate multiple retirement accounts safely (https://finhelp.io/glossary/how-to-consolidate-multiple-retirement-accounts-safely/).
• Maximizing employer match: Understanding employer match: how to maximize free retirement money (https://finhelp.io/glossary/understanding-employer-match-how-to-maximize-free-retirement-money/).

Final checklist (practical tick‑list to use before Dec. 31)

• [ ] Increase withholding or estimated payments if needed.
• [ ] Max employer plan deferrals and confirm employer match.
• [ ] Run loss‑harvesting trades and avoid wash sales.
• [ ] Complete Roth conversions (if appropriate) and model tax impact.
• [ ] Execute QCDs if charitably inclined and qualified.
• [ ] Contribute to HSA and review FSA balances.
• [ ] Reconcile year’s investment statements and gather tax documents.
• [ ] Review estate documents and beneficiary forms.

Professional note and disclaimer

In my 15+ years advising investors and high earners, disciplined year‑end reviews produce outsized benefits relative to time invested. Tax rules change, and specifics (contribution limits, RMD ages, and filing deadlines) can shift year to year — always confirm current-year figures on IRS.gov and consult your tax advisor for tailored advice. This article is for educational purposes and does not replace personalized tax, legal, or financial advice.