Year-End Tax Moves for High-Income Earners

For high-income earners, the final quarter of the year isn’t just about holiday plans and closing deals—it’s the sweet spot for making strategic tax decisions. When your income pushes you into higher tax brackets, every deduction and deferral can make a meaningful difference. And the window to act? It closes December 31.

At Andrea Ward CPA, we work closely with clients who are navigating the complexities of a sizable income. Whether you’re a business owner, executive, or investor, a few well-timed moves at year-end can significantly reduce your taxable income. Think: charitable giving, retirement contributions, and shifting investment timing.



So if you’re looking to wrap up the year on a smart financial note, here are the top strategies we recommend you consider before the clock strikes midnight on December 31.

Max Out Retirement Contributions

Let’s start with a classic, because it works. Contributing to tax-advantaged retirement accounts is one of the simplest and most effective ways to reduce your current-year taxable income.

Here are the 2024 contribution limits:

• 401(k): $23,000 (plus $7,500 catch-up if 50+)
• Traditional IRA: $7,000 (plus $1,000 catch-up if 50+)
• SEP IRA (for self-employed): Up to 25% of compensation or $69,000



These contributions reduce your taxable income now while building long-term savings. Just make sure you qualify—especially with IRAs, since income phaseouts can limit deductibility.

Real-world example: A tech executive earning $300,000 maxed out her 401(k) and added a $6,000 traditional IRA contribution. The result? About $8,000 in tax savings, depending on her filing status.

Charitable Giving: More Than Good Deeds

Charitable contributions can be a powerful tax tool, especially when paired with the right strategies. High-income earners who itemize deductions can deduct qualified donations made to 501(c)(3) organizations.

Ways to boost the benefit:

• Donate appreciated assets (like stocks or mutual funds) instead of cash. You’ll avoid capital gains and get a deduction.
• Bundle donations into one year to exceed the standard deduction.
• Use a donor-advised fund (DAF) to claim the deduction this year while distributing the funds over time.



Pro tip: Make sure to keep documentation. The IRS requires written acknowledgment for donations over $250.

Client snapshot: A couple we advised donated $50,000 worth of appreciated stock to a DAF, avoiding $10,000 in capital gains and claiming the full charitable deduction. Smart and generous.

Time Capital Gains and Losses Carefully

If you’ve sold investments at a gain this year, now’s the time to look at your portfolio and consider tax-loss harvesting. This means selling underperforming assets to offset gains and reduce taxable income.



Rules to remember:

• Capital losses can offset capital gains dollar-for-dollar.
• If losses exceed gains, up to $3,000 can offset ordinary income.
• Beware of the wash-sale rule—you can’t repurchase a "substantially identical" asset within 30 days.

Example: A real estate investor realized $100,000 in capital gains. By selling $30,000 in losing stocks, he reduced his net capital gain and avoided a higher tax tier.

Make an Extra Mortgage or Property Tax Payment

If you’re itemizing deductions, paying an extra mortgage payment or making your property tax payment before year-end can increase your deductions for this year. Just watch out for AMT (Alternative Minimum Tax) issues—sometimes, prepaying can trigger more harm than good.



Talk with your CPA to determine whether this move benefits your specific tax picture.

Use Flexible Spending Account (FSA) Funds Before They Expire

If you have an FSA through your employer, check the balance. Many FSA accounts follow a use-it-or-lose-it rule—meaning unused funds could vanish at the end of the year.



Schedule those eye exams, grab new glasses, or get that dental work done. If your plan has a rollover or grace period, that’s great—but don’t count on it without checking.

Consider a Roth Conversion

If your income is lower than usual this year—say, due to a sabbatical or investment dip—it might be a good time to convert some traditional IRA funds into a Roth IRA. You’ll pay taxes on the conversion now, but future withdrawals will be tax-free.

This is especially helpful if you expect higher tax rates later (which many of us do). And since Roth IRAs don’t have required minimum distributions (RMDs), they’re a solid estate planning tool.



Warning: The conversion amount counts as taxable income, so be strategic.

Defer Income Where Possible

If you have control over when income is received—like bonuses, freelance payments, or year-end distributions—deferring income until January might help keep you in a lower tax bracket.



This is especially useful if you’re on the edge of a new tax tier or trying to avoid phaseouts for deductions or credits.

Example: A consultant expecting $30,000 in December project income asked the client to delay payment until January. That deferral helped her stay under a key income threshold for the Qualified Business Income (QBI) deduction.

Contribute to an HSA (If You Qualify)

If you have a High Deductible Health Plan (HDHP), contributing to a Health Savings Account (HSA) is a triple-win:

• Contributions are tax-deductible
• Growth is tax-deferred
• Withdrawals for medical expenses are tax-free

For 2024, you can contribute up to:

• $4,150 for individuals
• $8,300 for families
• Extra $1,000 if you’re over 55



An HSA can serve as a stealth retirement account—especially if you pay medical expenses out-of-pocket and let the funds grow.

Make Gifts to Reduce Your Estate

High-income individuals often have estate tax exposure. Making annual gifts is a great way to reduce your taxable estate while helping loved ones.

You can give up to $17,000 per recipient (or $34,000 per couple) annually without using any of your lifetime gift exemption.



Tip: Use year-end gifting to support education savings (like 529 plans) or help kids with a down payment.

Don’t Forget State and Local Tax (SALT) Limits

The federal SALT deduction is still capped at $10,000. If you live in a high-tax state, be cautious with state tax prepayments or local tax strategies. They might not give you the full benefit you expect at the federal level.



Strategy: Some high-income earners use pass-through entity tax elections to shift SALT burdens from individual to business returns. Ask your CPA if this might apply to your situation.

Final Thoughts: Don’t Wait Until It’s Too Late

Tax planning for high-income earners is part strategy, part timing. And year-end is when it all comes together. A few smart moves now can save you thousands in April—but you have to act before the year wraps up.

At Andrea Ward CPA, we help high earners make confident, informed tax decisions that align with their goals. Whether you want to make a charitable impact, reduce your taxable income, or set up next year for success, we’re here to guide you through it.

So as you reflect on the year behind you, take a moment to plan for the one ahead. The best tax outcomes don’t happen by accident—they happen by design.