We get it: you’re perhaps the person who leaves holiday shopping to the final week, and your idea of meal prep is experimenting with whatever you can find in the cupboard. Are we right?

We blinked an eye, and the end-of-year tax time is upon us. But here’s the good news: even if you’ve dragged your feet, there’s still time to make smart moves before the year ends. From avoiding penalties to snagging deductions, this guide compiled by Ascend Advisor experts lays out actionable, last-minute tax strategies to help you save money and possibly your sanity.

1: Estimated Tax Payments: the January 15th Deadline

If you’re self-employed or have non-W-2 income, listen up: your fourth quarter estimated tax payment is due on January 15th. Missing this deadline can mean steep penalties, especially with higher interest rates.

In years past, penalties might have been negligible. Not anymore. The IRS interest rates have climbed alongside inflation, so late or insufficient payments hit harder than they used to.

Ascend Advisors’ Senior Tax Manager Karen Chavarrae offers this tip: 

“To avoid penalties, you need to pay 90% of your current year’s tax liability or 110% of last year’s tax liability (for higher earners),” she says. Karen adds that you should crunch the numbers carefully, especially if your income changed dramatically this year. Overpaying ties up cash unnecessarily, while underpaying costs you later.

2: Harvesting Losses: Can You Offset Gains?

The stock market has boomed this year, but if you’re sitting on any investments that have lost value, take a swig of optimism because you might still squeeze out some tax benefits. This strategy is called tax-loss harvesting.

Here’s how it works: Sell underperforming investments to offset any realized capital gains. If your losses outweigh your gains, you can use up to $3,000 of those losses to reduce ordinary income, and the remainder can roll into future years. There are nuances to this strategy to discuss with your tax advisor, but it’s a great option to ensure minimum tax paid and boost overall portfolio performance if you’re holding a few duds.

3: Charitable Giving: Reduce Taxes, Feels Good

Feeling charitable? Here’s how you can give to causes you care about while lightening your tax load:

After you turn 73, you must take Required Minimum Distributions (RMDs) from your IRA. A Qualified Charitable Distribution (QCD) allows you to donate directly from your IRA to a charity, reducing your taxable income and RMD obligations.

If you’re sitting on stock with substantial gains, avoid paying taxes on those gains by donating the stock directly. As Ascend Advisor Partner Jonathan Louie explains, it’s a win-win complete with all the feels.

“If you held the stock for at least a year, then you get credit for the contribution equal to the fair market value of the stock, regardless of what you paid for it,” says Jonathan. “Your gain is erased and you receive credit for the entire value. For example, if you bought the stock for $100 and it’s now worth $1000, you can donate it, get credit for the full $1000 and avoid paying tax on the $900 gain,” he says. 

In short, wouldn’t you prefer your money to go to a charity you love rather than Uncle Sam?

4: Max Your Retirement Contributions – There’s Still Time

Retirement savings are an effective way to channel your taxable income. Even better? Some plans allow you to contribute well into the following year.

• Traditional and Roth IRAs: You have until April 15th 2025 to make contributions for 2024. Depending on your income level, traditional IRA contributions might lower your taxable income.
• SEP IRAs: If you file for an extension, you can contribute to a SEP IRA as late as September 15th, 2025 (for business owners) and October 15, 2025 (for sole practitioners). You can even create the account and fund it right before the deadline.

Pro tip from Karen and Jonathan: The backdoor Roth IRA strategy allows higher earners to contribute to a Traditional IRA and convert it into a Roth IRA, bypassing income limits.

5: Electric Vehicle (EV) Credit: Use it Before it Disappears

If you’ve been eyeing a shiny new electric vehicle, now might be the time to take charge (sorry, pun crime). The EV tax credit offers significant savings (up to $7,500), but with political uncertainty looming, there’s a chance this benefit could disappear in 2025. (Although someone with the initials EM might have thoughts on that.)

On top of that, the bonus depreciation on business-use vehicles drops from 60% in 2024 to 40% in 2025. So, if you need a work vehicle, buying before December 31st could lock in bigger tax breaks.

Consider it your festive present to yourself – with a big red bow of financial and environmental savings.

6: Tax-Free Gifting: the Double-Dip Trick

Want to help out family members while staying tax-savvy? The annual gift tax exclusion allows you to give up to $18,000 per person per year (or $36,000 per gift-giving married couple) without incurring taxes.

Here’s the kicker: If you want to make a significant gift, you can double up by giving $18,000 on December 31st, 2024 and another $18,000 on January 1st, 2025. That’s a cool $36,000 over two days, with the love spread across separate tax years without tapping into your lifetime exclusion. 

As Jonathan bluntly explains: “Use it or lose it!”

7: Pay State Taxes Before December 31st

For those who owe state taxes or pass-through entity payments (for partnerships or S-corporations), here’s a top tip: Pay by December 31st to deduct those taxes in the current year – rather than waiting for April.

In states like California, this can add up to substantial savings. Just be sure you’re not subject to the State and Local Tax (SALT) deduction limit of $10,000. For those subject to the limit with businesses eligible to make pass-through entity payments, be sure to pay those by December 31st; those payments are not subject to any limit and the deduction can be taken in the current year.

8: Oh, Baby, Timing Matters!

Here’s a quirky but valuable tip for expectant parents: your baby’s date of birth can impact your tax credits.

Currently, the child tax credit stands at $2,000 per child. However, proposed legislation could raise it to $5,000 per child in 2025. If this change becomes retroactive, it could mean a hefty boost.

So, if you’re expecting a December 31st delivery, resisting that final push to hold off until January 1st might pay off – though we’ll leave that decision to you and your doctor!

Final Thoughts: Don’t Let Lagging Cost You

Sure, the clock is ticking, but it’s not too late to make smart moves that can reduce your tax bill, avoid penalties, and set yourself up for a better financial start in the new year.

The strategies above are straightforward and impactful, from prepaying taxes to maximizing retirement contributions and gifting. Even minor adjustments now can save you big when tax time rolls around. Wouldn’t you love to start the new year with a little extra cash in your pocket?

Happy planning!