Year-End Tax Planning Strategies to Reduce Your Tax Bill Before December 31

What you do before December 31 matters more than most people realize.
Once the year ends, many of the most powerful tax-saving strategies are no longer available — no matter how good your accountant is.

In this Tax Tuesday webinar, we walked through the most important year-end tax planning strategies for individuals, families, and business owners who want to stay in control of their taxes, not react to them in April.

Below is a full breakdown of the strategies covered in the session, along with real-world explanations and examples to help you understand what applies to you and why timing matters.

Tax Planning vs. Tax Preparation: Why Year-End Is Critical

One of the biggest misconceptions we see is assuming tax planning happens during tax season.

In reality, there are two distinct phases:

• Tax planning → January through December 31

• Tax preparation (reporting) → January through April

Once December 31 passes, most planning opportunities disappear. At that point, your tax return becomes a reporting exercise — not a strategy session.

This is why year-end is such a critical window:

• Charitable contributions must be completed

• Payroll must be set up correctly

• Asset sales must be finalized

• Income and deductions must already exist

Waiting until April often leads to the same frustration:

“Why didn’t we talk about this sooner?”

Roth Conversions: Paying Taxes Intentionally (Not Accidentally)

A Roth conversion involves moving money from a tax-deferred account (like a Traditional IRA or 401(k)) into a Roth IRA, paying taxes now in exchange for tax-free growth and withdrawals later.

Why Would You Pay Taxes Now?

Roth conversions can make sense when:

• You’re in a temporarily lower-income year

• You’re winding down a business

• You’re early retired or taking a sabbatical

• You’re planning ahead of Required Minimum Distributions (RMDs)

• You believe tax rates will be higher in the future

The goal is not to avoid taxes entirely — it’s to control when and how much tax you pay.

The Importance of “How Much” You Convert

Converting too much in one year can:

• Push you into higher tax brackets

• Trigger Medicare IRMAA surcharges

• Eliminate deductions or credits due to phaseouts

• Increase student loan repayments tied to income

The best Roth conversion is rarely the biggest one — it’s the most intentional one.

This is why Roth conversions should almost always be calculated, reviewed, and coordinated with other income sources before being executed.

Family Payroll Strategies: Turning Income Into Long-Term Wealth

One of the most powerful — and underutilized — tax strategies available to business owners is paying family members legitimately through the business.

When done correctly, this can:

• Reduce the parent’s taxable income

• Shift income to lower tax brackets

• Create earned income for children

• Unlock Roth IRA contributions at a very young age

What Counts as Legitimate Work?

Children must perform real, age-appropriate work, such as:

• Administrative tasks

• Filing or office organization

• Cleaning or maintenance

• Marketing or social media assistance

• Website updates or design

• Modeling or advertising participation (when appropriate)

Documentation matters:

• Job descriptions

• Timesheets

• Reasonable wages

• W-2 payroll (not 1099)

This is a tax strategy, not a loophole.

Schedule C vs. S-Corp: Why Structure Matters

If you operate as a Schedule C (sole proprietor) and your child is under age 18:

• No Social Security tax

• No Medicare tax

• No FUTA tax

This makes Schedule C family payroll especially powerful.

If you operate as an S-Corporation, different payroll tax rules apply — which is why entity structure should always be reviewed before implementing family payroll.

Roth IRAs for Kids: Starting Tax-Free Growth Early

Once a child has earned income, they are eligible to contribute to a Roth IRA — even if the parent provides the actual cash.

Why This Is So Powerful

A Roth IRA:

• Grows tax-free

• Has no required minimum distributions

• Allows penalty-free access to principal

• Can be used later for:

  • Education expenses

  • First home down payment

  • Retirement

In the webinar, we walked through an example showing how just five years of Roth contributions during childhood can potentially grow into hundreds of thousands — or even close to $1 million — tax-free by retirement, depending on market returns.

This strategy is as much about financial education as it is about tax efficiency.

Tax-Loss Harvesting: Using Losses Strategically

Tax-loss harvesting allows you to:

• Offset capital gains with capital losses

• Reduce ordinary income (within limits)

• Carry unused losses forward to future years

This strategy is particularly effective when:

• You’ve realized gains elsewhere

• You’ve received an unexpected bonus

• You’re coordinating with Roth conversions

• You’re rebalancing your investment portfolio

Care must be taken to avoid wash sale rules, which can disallow losses if assets are repurchased too quickly.

Charitable Giving: Giving With Intention and Efficiency

Charitable giving can be both generous and tax-efficient.

Smarter Ways to Give

• Donating appreciated stock or crypto instead of cash

• Avoiding capital gains taxes on donated assets

• Using Donor-Advised Funds (DAFs) for larger or multi-year giving

• “Bunching” contributions into one year to exceed the standard deduction

Proper documentation is critical, especially for:

• Large donations

• Non-cash assets

• Privately held investments

Business Owner Year-End Moves

For business owners, year-end planning often includes:

• Accelerating necessary expenses

• Deferring income when appropriate

• Reviewing Section 179 and bonus depreciation rules

• Cleaning up books before year-end

• Reviewing reasonable compensation for S-Corp owners

• Understanding how planning decisions affect the Qualified Business Income (QBI) deduction

Strong bookkeeping throughout the year is one of the best ways to avoid tax surprises.

Common Year-End Mistakes to Avoid

We see these every year:

• Doing Roth conversions without calculations

• Buying equipment solely for a deduction

• Over-contributing to retirement accounts

• Relying on social media “tax hacks”

• Waiting until tax season to plan

Once the year closes, many of these mistakes cannot be undone.

A Simple Year-End Tax Planning Checklist

Before December 31, consider reviewing:

• Roth conversion opportunities

• Family payroll setup

• Retirement contributions

• Charitable giving strategies

• Investment gains and losses

• Business deductions and depreciation

• Withholding and estimated tax payments

Final Thoughts: Control the Outcome Before the Year Ends

Everyone is required to pay taxes — but no one is required to overpay.

Year-end tax planning is about:

• Being intentional

• Coordinating strategies

• Avoiding surprises

• Aligning your money with what matters most

The earlier you plan, the more options you have.

Want Help Applying This to Your Situation?

If you’d like help reviewing which of these strategies apply to you, we offer year-end tax planning consultations for individuals and business owners.

👉 View upcoming Tax Tuesday webinars or request a consultation at:
https://molentax.com/webinars