Can You Reduce Your Tax Bill After December 31?

Once the calendar year ends, the window for many tax planning strategies closes. However, that does not mean every opportunity to reduce your prior year's tax liability has disappeared. Depending on your business structure and circumstances, there may still be steps you can take after December 31 that affect your tax return.

Tax Strategies That Typically End on December 31

Many tax planning opportunities are tied directly to the calendar year. Once December 31 passes, they generally cannot be changed for that tax year.

Charitable Contributions

For most taxpayers, charitable donations must be completed by December 31 to qualify as a deduction for that tax year. Waiting until January means the deduction usually applies to the following year's return.

Business Equipment Purchases

Businesses often purchase equipment before year-end to take advantage of depreciation deductions or Section 179 expensing. While depreciation rules vary depending on the type of asset and when it is placed into service, purchases made after December 31 generally count toward the new tax year instead.

Income and Expense Timing

Some businesses, particularly cash-basis taxpayers, may have flexibility to accelerate deductible expenses or defer income before year-end. Once the calendar changes, those timing opportunities are usually no longer available for the prior year's return.

Certain Retirement Contributions

While some retirement plan contributions can still be made after year-end, others require action before December 31. The applicable deadlines depend on the type of retirement plan and when it was established.

Opportunities That May Still Be Available

Although many year-end strategies expire, several important tax planning opportunities remain available after December 31.

Retirement Plan Contributions

Certain retirement accounts allow contributions after the close of the calendar year, provided they are made before the applicable filing deadline.

For eligible business owners and self-employed individuals, these contributions may still reduce taxable income for the prior year. Contribution deadlines vary depending on the type of retirement plan and whether an extension is filed.

IRA Contributions

Many taxpayers have until the federal tax filing deadline to make eligible Traditional or Roth IRA contributions for the previous tax year.

Eligibility and deductibility depend on income levels, participation in employer-sponsored retirement plans and other IRS rules.

Health Savings Account (HSA) Contributions

Individuals enrolled in qualifying high-deductible health plans may also have until the tax filing deadline to make HSA contributions for the previous year.

These contributions may provide valuable tax benefits while helping cover future medical expenses.

Business Elections That Can Still Be Made

Depending on your business circumstances, there may still be opportunities to make elections that affect how your business is taxed or how certain deductions are calculated.

For example, some depreciation elections and elections affecting the business’s tax classification are made on the tax return itself or have filing deadlines that extend beyond December 31. Because the rules vary significantly, it's important to review your options with a CPA before filing.

Don't Forget About Tax Credits

Even after the calendar year ends, your CPA may identify tax credits that you weren't aware your business qualified for.

Examples could include credits related to:

• Research and development activities
• Energy-efficient improvements
• Hiring incentives
• Small business health care benefits
• Certain state-specific tax programs

Review Your Return Before Filing

Preparing a tax return involves much more than adding up income and expenses. Your CPA may identify elections, deductions, depreciation strategies, retirement opportunities or credits that software alone may not recognize.

Even if December 31 has already passed, careful tax planning before filing your return can still produce meaningful savings.

Plan Ahead for Next Year

If you discover that several tax-saving opportunities expired because they weren't addressed before year-end, don't wait until next December to start planning again.

A tax-planning meeting before the end of the year can give your CPA time to estimate your potential liability, identify relevant deadlines and recommend steps that must be completed before December 31.

Partner With Our CPA in Phoenix for Proactive Tax Planning

Our experienced accounting team can review your financial situation, explain your options and help ensure you're taking advantage of every opportunity available under current tax laws.

Give us a call at (480) 561-5805 or schedule your consult here on our website.