How to reduce your U.S. tax bill before December 31
- rlaraki
- 6 days ago
- 2 min read
Every year, many taxpayers wait until tax season to think about their tax bills. But the truth is, there are smart moves you can make before December 31 that can lower what you owe to the IRS. Taking action now gives you more control over your finances and can save you significant money. LARAKI TAX & ACCOUNTING is here to guide you through practical steps to reduce your U.S. tax bill before the year ends.
Maximize Retirement Contributions
One of the most effective ways to reduce your taxable income is by contributing to retirement accounts. Contributions to traditional IRAs and 401(k)s reduce your taxable income for the year.
For 2024, you can contribute up to $22,500 to a 401(k), or $30,000 if you are 50 or older.
Traditional IRA contributions can be up to $6,500, or $7,500 if you are 50 or older.
By increasing your contributions before December 31, you lower your taxable income, which means a smaller tax bill. LARAKI TAX & ACCOUNTING recommends reviewing your current contributions and adjusting them if possible.
Harvest Tax Losses from Investments
If you have investments that have lost value, you can sell them to realize a loss and offset gains from other investments. This strategy, called tax-loss harvesting, can reduce your capital gains tax.
You can use up to $3,000 of excess losses to offset ordinary income.
Losses beyond that can be carried forward to future years.
Make sure to avoid buying the same or substantially identical security within 30 days to prevent the wash-sale rule from disallowing the loss.
Prepay Deductible Expenses
Prepaying certain expenses before year-end can increase your itemized deductions. This strategy works well if you expect to itemize deductions rather than take the standard deduction.
Consider prepaying property taxes or making charitable donations.
Medical expenses paid before December 31 may also count if they exceed 7.5% of your adjusted gross income.
LARAKI TAX & ACCOUNTING advises keeping detailed records of these payments to ensure you can claim the deductions properly.
Consider Business Expense Timing
If you own a business or are self-employed, timing your expenses can impact your taxable income.
Accelerate purchases of equipment or supplies before year-end.
Pay bonuses or other deductible expenses in December rather than waiting until next year.
These moves reduce your taxable income for the current year, lowering your tax bill. LARAKI TAX & ACCOUNTING can help you identify which expenses to accelerate based on your business situation.
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