Tax season feels far away, until suddenly it isn't. By the time W-2s start arriving in January, most of your options for reducing what you owe have already closed. The real window fo rtax planning is right now, before December 31st.
This checklist is written for individuals: employees, parents, homeowners, retirees, and anyone who files a personal tax return. Whether you also run a business or not, these are the steps that can make a real difference in what you owe or what you get back.
Step 1: Know What Changed This Year
Before anything else, think about what was different in your life this year compared to last year. Life changes almost always have tax consequences, and if your withholding or estimated payments haven't kept up, you could be in for a surprise.
Ask yourself:
• Did you get married or divorced?
• Did you have or adopt a child?
• Did you buy or sell a home?
• Did you start a side job or freelance work?
• Did you retire or change jobs?
• Did you receive an inheritance or large financial gift?
• Did you sell investments, stocks, or cryptocurrency?
• Did you have significant medical expenses?
Any of these events can shift your tax bracket, change your eligibility for credits and deductions, or create new tax obligations you weren't expecting. The sooner you know, the sooner you can plan.
Step 2: Check Your Withholding
Pull up your most recent paystub and look at your year-to-date federal and state tax withholding. Then estimate your total income for the year.
If you've had a life change, changed jobs, or have multiple sources of income, your withholding may be off. Too little withheld means you'll owe at filing, and possibly a penalty. means you've been giving the government an interest-free loan all year.
💡 Use the IRS Tax Withholding Estimator at IRS.gov to check your situation quickly. If you're under-withheld, you can submit a new W-4 to your employer before year end to have more taken out of your remaining paychecks.
Step 3: Maximize Your Retirement Contributions
This is one of the most powerful and underused tools for reducing your taxable income. and it's completely legal. Contributions to traditional retirement accounts reduce the amount of your income that gets taxed.
401(k)or 403(b) Through Your Employer
• 2024 contribution limit: $23,000 ($30,500 if you are 50or older)
• Contributions must be made by December 31st, they comeout of your paycheck so check your current contribution rate now
• If you haven't maxed it out and can afford to increase contributions for your remaining paychecks, even a small bump makes a difference
Traditional IRA
• 2024 contribution limit: $7,000 ($8,000 if you are 50or older)
• You have until April 15th of the following year to contribute, but don't wait
• Deductibility depends on your income and whether you have a workplace retirement plan
Health Savings Account (HSA)
• Only available if you have a high-deductible health plan
• 2024 limits: $4,150 for individuals, $8,300 forfamilies
• Contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free, a triple tax benefit
• You have until April 15th to contribute for the prioryear
Step 4: Review Your Deductions
Every year, taxpayers leave money on the table by not tracking deductions throughout the year. Before December 31st, make sure you've captured everything you're entitled to.
Charitable Contributions
• Cash donations require a bank record or written receipt from the organization
• Non-cash donations (clothing, furniture, household items) need a receipt showing the charity's name and a description of what was donated
• Donated items must be in good used condition or better to qualify
• If you donated a vehicle, get a written acknowledgment from the charity
• Planning to donate before year end? December 31st isthe deadline for it to count this tax year
Medical Expenses
You can deduct medical expenses that exceed 7.5% of your Adjusted Gross Income (AGI). If you've had significant medical costs this year like surgeries, dental work, vision, prescriptions, mental health, add them up. If you're close to the threshold, it may make sense to accelerate any planned medical expenses before December 31st.
Mortgage Interest and Property Taxes
• Mortgage interest is deductible if you itemize, your lender will send Form 1098 in January
• State and local taxes (SALT) including property taxes are deductible up to $10,000 combined
• Make sure your property tax payment for the year is made before December 31st if you want to deduct it this year
Student Loan Interest
If you're repaying student loans, you may be able to deduct up to $2,500 in interest paid this year, even if you don't itemize. Your loan servicer will send Form 1098-E showing how much interest you paid.
Step 5: Review Investment Activity
If you have a brokerage account,sold stocks, or sold cryptocurrency this year, you have capital gains or lossesto report. This is an area where planning before year end can make a significant difference.
• Short-term gains (assets held less than one year) aretaxed as ordinary income — the same rate as your salary
• Long-term gains (assets held more than one year) aretaxed at lower preferential rates — 0%, 15%, or 20% depending on your income
• Capital losses can offset capital gains dollar fordollar, and up to $3,000 of excess losses can offset ordinary income
• Tax-loss harvesting — strategically selling losinginvestments before year end to offset gains — is worth discussing with afinancial advisor
⚠️ Cryptocurrency is taxable. Every sale, trade,or exchange of crypto is a taxable event. If you've been active in crypto this year, make sure all transactions are documented. The IRS has made crypto reporting a priority.
Step 6: Check Tax Credits You May Qualify For
Unlike deductions which reduce your taxable income, credits reduce your actual tax bill dollar for dollar. Make sure you're not missing any.
• Child Tax Credit: up to $2,000 per qualifying childunder 17
• Child and Dependent Care Credit: if you paid forchildcare while you worked
• Earned Income Tax Credit (EITC): for lower to moderate income individuals and families
• American Opportunity Credit or Lifetime Learning Credit: for tuition and education expenses
• Saver's Credit: for contributions to retirement accounts if your income is below certain limits
• Energy Efficient Home Improvement Credit: if you madequalifying upgrades to your home this year
Step 7: Rhode Island Specific Reminders
• Rhode Island has its own state income tax. Make sureyour RI withholding is current and matches your expected liability
• RI does not conform to all federal deductions, someitems deductible federally may not be deductible in RI
• If you paid property taxes in RI you may qualify forthe RI property tax relief credit, check with a tax professional
• RI does tax Social Security income depending on your filing status and income level
Step 8: Get Your Documents Organized Now
The single most impactful thing you can do right now is start a folder (physical or digital) and begin collecting your tax documents. By January and February you should have:
• W-2 from every employer
• 1099s for any freelance, gig, or investment income
• 1098 for mortgage interest
• 1098-E for student loan interest
• 1098-T for tuition payments
• Social Security benefit statement (SSA-1099) ifapplicable
• All charitable donation receipts
• Records of any major financial transactions, homesale, investments, crypto
• Any IRS or RI Division of Taxation correspondencereceived this year
💡 Pro tip: Create a simple folder on your phone or computer labeled with the tax year and drop documents in as they arrive. By the time you sit down with your tax preparer, everything is in one place.
The Bottom Line
The moves you make before December 31st, contributing to retirement, making charitable gifts, reviewing your withholding, capturing deductions, are the ones that actually reduce your tax bill. Everything after January 1st is just reporting what already happened.
Work with a tax professional who knows your situation. Make sure you're not paying more than you legally have to, and that you're set upwell for the year ahead.
Have questions about your personal tax situation?
Book a free 30-minute Discovery Call with Us. We serve individuals across the USA with personal tax preparation and year-round tax planning! Email us at: tax@bkmri.com
