Complete these critical year-end financial tasks before December 31, including tax-loss harvesting, charitable giving, FSA spending, Roth conversions, and required minimum distributions.
Identify investments with unrealized losses in taxable accounts
Review each holding's cost basis versus current value. Only taxable brokerage accounts qualify for tax-loss harvesting. Losses in 401(k)s, IRAs, and other tax-advantaged accounts cannot be harvested.
Sell losing positions to offset realized capital gains
Losses first offset gains of the same type (short-term against short-term, long-term against long-term), then offset gains of the other type. After offsetting all gains, you can deduct up to $3,000 against ordinary income.
Avoid the wash sale rule when reinvesting
You cannot buy a substantially identical security within 30 days before or after the sale. Buy a similar but not identical investment to stay invested. For example, swap a U.S. total market fund for a large-cap fund.
Charitable Contributions
Make final charitable donations before December 31
Cash donations via credit card count on the charge date. Check donations count on the postmark date. Stock transfers can take 3-7 business days, so initiate them by December 20 at the latest.
Consider donating appreciated stock instead of cash
Donating stock held over one year lets you deduct the full market value and avoid capital gains tax. On $10,000 of stock with $7,000 in gains, you save the deduction plus $1,050-1,400 in avoided capital gains tax.
Make a qualified charitable distribution if over age 70.5
A QCD of up to $105,000 directly from your IRA to charity counts toward your required minimum distribution but is excluded from taxable income. Contact your IRA custodian at least 2 weeks before year-end.
FSA and HSA Maximization
Spend remaining healthcare FSA funds before the deadline
Check your plan for either a $640 rollover or 2.5-month grace period. If neither applies, any unspent balance is forfeited. Schedule dental cleanings, eye exams, or stock up on eligible OTC products.
Max out HSA contributions before December 31
The 2024 HSA limits are $4,150 for individual and $8,300 for family coverage, plus $1,000 catch-up if 55+. Unlike FSA funds, HSA balances roll over indefinitely and can be invested for growth.
Use remaining dependent care FSA funds on eligible expenses
Dependent care FSA funds are also use-it-or-lose-it with no rollover option. Pay any outstanding childcare or elder care bills before year-end. Get receipts showing the provider's tax ID number.
Roth Conversion Planning
Calculate room for a Roth conversion in your current tax bracket
If you are in the 22% bracket, which ends at $100,525 for single filers in 2024, you can convert traditional IRA funds to Roth up to that ceiling. Converting at 22% makes sense if you expect to be in a higher bracket in retirement.
Initiate the Roth conversion before December 31
Roth conversions must be completed by December 31 to count for the current tax year. Unlike IRA contributions, there is no April 15 extension. Request the conversion at least 1 week before year-end.
Set aside funds to pay the income tax on the conversion
Pay the tax from non-retirement funds, not from the converted amount. A $20,000 conversion at the 22% bracket generates $4,400 in federal tax. Reducing the conversion amount to pay taxes defeats the purpose.
Required Minimum Distributions
Take your RMD if you are 73 or older
The deadline is December 31 each year (April 1 only for your first RMD year). The penalty for missing an RMD is 25% of the undistributed amount, reduced to 10% if corrected within 2 years.
Calculate the correct RMD amount using the IRS Uniform Lifetime Table
Divide your account balance as of December 31 of the prior year by the distribution factor for your age. At age 73, the factor is 26.5, so a $500,000 IRA requires an RMD of approximately $18,868.
Take RMDs from each account type that requires them
RMDs are required from traditional 401(k)s, traditional IRAs, SEP IRAs, and SIMPLE IRAs. Roth IRAs do not require RMDs during the owner's lifetime. You can aggregate IRA RMDs and take the total from one IRA.
Gifting and Capital Gains
Make annual exclusion gifts before December 31
You can gift up to $18,000 per recipient per year without filing a gift tax return. A married couple can jointly gift $36,000 per recipient. Gifts above this amount count against your lifetime exemption of $13.61 million.
Review capital gains distributions from mutual funds
Mutual funds distribute capital gains in November and December. Check your fund company's estimated distribution schedule. Large distributions can push you into a higher tax bracket or trigger the 3.8% NIIT.
Defer income or accelerate deductions if beneficial
If you expect lower income next year, defer a year-end bonus or invoice to January. If you expect higher income next year, prepay deductible expenses like state taxes or mortgage interest before December 31.
Max out 401(k) contributions with your final paycheck
The 2024 limit is $23,000 ($30,500 if 50+). Check your year-to-date contributions on your pay stub. If you are short, increase your contribution percentage on your final 1-2 paychecks of the year.
Frequently Asked Questions
What is the deadline for tax-loss harvesting?
Tax-loss harvesting trades must settle by December 31, and stock trades take one business day to settle (T+1 since May 2024). To be safe, execute trades by December 27-28, accounting for weekends and holidays. The wash sale rule prevents you from buying a substantially identical security within 30 days before or after the sale. You can immediately buy a similar but not identical replacement, such as selling an S&P 500 fund and buying a total market fund.
When is the deadline for Roth IRA conversions?
Roth conversions must be completed by December 31 of the tax year (no extension to April 15 like contributions). The conversion amount is added to your taxable income for that year, so calculate carefully to avoid pushing yourself into a higher bracket. Partial conversions let you fill up your current bracket precisely. Once completed, a Roth conversion cannot be reversed, as recharacterization of conversions was eliminated by the Tax Cuts and Jobs Act in 2018.
What year-end charitable giving deadlines should I know?
Cash and check donations must be postmarked by December 31. Credit card donations count for the year charged, even if the statement arrives in January. Stock transfers must be initiated by mid-December to allow settlement time (DTC transfers take 3-5 business days). Donor-advised fund contributions must be received by the fund by December 31. Qualified Charitable Distributions from IRAs must be distributed by December 31 and go directly to the charity.
What are required minimum distributions and when do they apply?
RMDs are mandatory annual withdrawals from Traditional IRAs, 401(k)s, and other pre-tax retirement accounts starting at age 73 (rising to 75 in 2033 under SECURE 2.0). Your first RMD can be delayed until April 1 of the following year, but this forces two RMDs in one year creating a potential tax spike. The penalty for missing an RMD is 25% of the amount not withdrawn (reduced from 50% by SECURE 2.0). Roth IRAs have no RMDs during the owner's lifetime.