These 3 Smart Year-End Moves Can Save You Big on Taxes

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Want to lower your tax bill? Read on for tips on how to do so in the next two months. 

Taxes are one of those annoying things everyone has to deal with. And chances are, you’d prefer to pay less in taxes rather than more.

Well, here’s some good news. If you make these moves by the end of the year, you might shrink your 2023 tax bill quite nicely.

1. Pump more money into your 401(k)

Many people have access to a 401(k) plan through work. If you’re saving for retirement in a traditional 401(k), every dollar you put in is a dollar the IRS won’t tax you on, up to the annual limit of $22,500 if you’re under 50 or $30,000 if you’re 50 or older.

Now if you have an individual retirement account (IRA), you get until mid-April of 2024 to fund that account and have it count for 2023 tax purposes. But any 401(k) contributions you want to count for 2023 have to be made in 2023. So now’s the time to contact your payroll department and see what you need to do to increase your contributions. You may have to submit a form or fill out a request online for them to process that change.

2. Sell losing investments that aren’t likely to recover

Generally speaking, when the investments in your portfolio lose value, it’s a good idea to sit tight and wait things out. Often, investments will recover, whereas if you sell right away, you’ll lock in a loss.

But sometimes, it does pay to sell a bum investment, such as if you have a stock in your portfolio that’s consistently been losing value and isn’t likely to recover. And the good news is that doing so could benefit you from a tax standpoint.

When you sell assets in your portfolio at a loss, you can use that loss to offset capital gains. So let’s say you sold stocks earlier this year at a $1,000 profit. If you sell a stock you no longer want and lose $600 in the process, you’ll only be looking at taxes on $400 worth of gains, not $1,000. You can also use up to $3,000 in losses to offset income for the year if you don’t have any gains in your portfolio to offset.

3. Purchase equipment and supplies you need for your side gig or small business

If you’re self-employed or run a small business, the supplies and equipment you purchase related to that work count as a tax write-off. So rather than wait a few months to buy the things you need to keep earning money, buy them this year.

If you’re a content editor and need a new monitor for work, that’s a totally legitimate deduction. And if you own an IT consulting company and you need to buy some cables, do it by Dec. 31.

Incidentally, in the coming weeks, you may find that retailers are running their biggest sales of the year. So aside from a tax write-off, it could benefit you to purchase equipment sooner rather than later.

Nobody wants to pay the IRS more money than necessary. If you make these moves, you may find that you’re able to nicely slash your tax bill — and keep more of your hard-earned money for yourself.

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