As the year draws to a close, effective Q4 tax planning becomes your final opportunity to reduce your 2025 tax liability and position yourself for financial success. The decisions you make in these remaining weeks can translate into significant savings and set a solid foundation for 2026. At Scharf Pera & Co., PLLC, we’ve guided Charlotte-area individuals and businesses through strategic year-end planning for nearly five decades. Here are ten essential moves to consider before December 31st.
1. Maximize Retirement Contributions
One of the most powerful Q4 tax planning strategies involves maximizing your retirement account contributions. For 2025, the IRS has increased 401(k) contribution limits to $23,500, up from $23,000 in 2024. If you’re age 50 or older, you’re eligible for additional catch-up contributions.
These contributions reduce your current taxable income while building long-term retirement security. Review your year-to-date contributions now and increase your deferrals if you haven’t reached the maximum. Keep in mind that 401(k) contributions must be made by December 31st, unlike IRA contributions which have until the tax filing deadline.
2. Accelerate Deductible Expenses
Strategic timing of deductible expenses can optimize your Q4 tax planning results. Consider prepaying January business expenses in December if you expect to be in the same or higher tax bracket next year. This might include software subscriptions, professional memberships, insurance premiums, or necessary equipment purchases.
For individuals, if you’re approaching the 7.5% of adjusted gross income threshold for medical expense deductions, bunching elective procedures or expenses into the current year could push you over the threshold. However, exercise caution with this strategy—accelerating expenses only makes sense when it aligns with your overall financial picture and doesn’t compromise cash flow.
3. Harvest Investment Losses
Tax-loss harvesting remains one of the most effective Q4 tax planning techniques for investors. Review your investment portfolio for positions with unrealized losses that can offset capital gains realized earlier in the year. Capital losses can offset an unlimited amount of capital gains, and any excess loss can offset up to $3,000 of ordinary income annually, with remaining losses carrying forward to future years.
Be mindful of the wash sale rule, which prohibits claiming a loss if you repurchase the same or substantially identical security within 30 days before or after the sale. Work with your financial advisor to identify alternative investments that maintain your portfolio allocation while capturing the tax benefit.
4. Review Estimated Tax Payments
Business owners and individuals with income not subject to withholding should review their estimated tax payment requirements as part of their Q4 tax planning process. The fourth quarter estimated payment is due January 15, 2026, but making pass-throughestimates by December 31st can provide additional deductions for current year.
Safe harbor rules generally require you to pay either 90% of your current year tax liability or 100% of your prior year tax liability (110% if your adjusted gross income exceeds $150,000). If you’ve had a particularly strong income year or sold significant assets, adjusting your final estimated payment now prevents unpleasant surprises come April.
5. Bunch Charitable Contributions
For taxpayers who typically hover near the standard deduction threshold, bunching charitable contributions into alternating years can maximize tax benefits. For 2025, the standard deduction has increased to $15,000 for single filers, $30,000 for married couples filing jointly, and $22,500 for heads of household.
Consider using a donor-advised fund to consolidate multiple years of charitable giving into 2025, allowing you to itemize this year while taking the standard deduction in future years. Donating appreciated securities directly to charities avoids capital gains taxes while providing a deduction for the full fair market value—a powerful Q4 tax planning strategy that benefits both you and your chosen causes.
6. Consider Roth Conversions
Q4 tax planning often includes evaluating Roth conversion opportunities, particularly in years when your income is lower than usual. Converting traditional IRA funds to a Roth IRA triggers immediate taxation, but qualified future distributions become tax-free, and Roth IRAs aren’t subject to required minimum distributions during your lifetime.
The key consideration is whether you expect to be in a higher tax bracket in retirement than you are currently. Also factor in how the conversion might affect your Medicare premiums if you’re approaching or already at retirement age, as higher income can trigger Income-Related Monthly Adjustment Amounts (IRMAA).
7. Review Depreciation Strategies
Business owners should evaluate equipment purchases and depreciation elections as part of their Q4 tax planning strategy. Section 179 expensing allows you to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year, with generous limits that benefit most small to mid-sized businesses.
Bonus depreciation, which has been phasing down under current law, still provides opportunities for first-year deductions on eligible assets. The timing of asset purchases matters—generally, equipment must be placed in service by December 31st to qualify for current-year deductions. However, carefully consider whether accelerating purchases makes operational sense beyond the tax benefit.
8. Maximize Health Savings Account Contributions
Health Savings Accounts offer a triple tax advantage unmatched by most other savings vehicles, making them essential to any comprehensive Q4 tax planning strategy. For 2025, contribution limits are $4,300 for self-only coverage and $8,550 for family coverage, with an additional $1,000 catch-up contribution available for those age 55 and older.
Unlike Flexible Spending Accounts, HSA funds roll over indefinitely and can be invested for long-term growth. Contributions reduce your taxable income, growth is tax-free, and qualified withdrawals for medical expenses are never taxed. Unlike retirement account contributions, you must make HSA contributions by December 31st to count for the current tax year.
9. Adjust Withholding or Make Year-End Payments
Review your W-4 withholding to ensure accuracy for both 2025 and 2026. If you expect a large refund, you’re essentially giving the government an interest-free loan. Conversely, if you consistently owe taxes at filing time, adjusting your withholding now prevents cash flow disruptions next April.
For employees expecting year-end bonuses, consider requesting additional withholding from those payments to cover any tax shortfall. Business owners with variable income should calculate their annual tax liability carefully and make additional payments if needed. Remember that estimated tax payments are generally treated as made evenly throughout the year, but withholding is treated as if made ratably over the entire year, potentially offering better protection against underpayment penalties.
10. Document and Organize Records
Effective Q4 tax planning extends beyond strategic decisions to include practical preparation. Gather receipts, invoices, and documentation for all deductible expenses now, while the year is still fresh in your mind. This includes charitable contribution receipts (required for any donation over $250), mileage logs for business use of your vehicle, and home office calculations if you’re self-employed.
Implement systems for 2026 tracking before the new year begins. Digital tools and apps can simplify record-keeping throughout the year, making next year’s Q4 tax planning process smoother. Proper documentation isn’t just good practice—it’s your protection in the event of an audit.
Your Year-End Planning Partner
While these ten strategies provide a solid framework for Q4 tax planning, every individual and business has unique circumstances that require personalized guidance. Tax law complexity, combined with your specific financial situation, means that professional advice can uncover opportunities these general guidelines might miss.
The team at Scharf Pera & Co., PLLC understands that effective Q4 tax planning requires both technical expertise and a deep understanding of your financial goals. Don’t wait until December 30th to start your year-end planning. Contact us today to schedule your year-end tax planning consultation and take control of your tax future.
