Last Minute Tax Refund Tips

Year end tax planning means taking specific financial steps before December 31 to lower your taxable income and boost your eventual refund. Deadlines for retirement contributions, charitable gifts, and certain credits fall on the calendar year, so decisions made in the next few weeks can change what you owe.

At a Glance

• Some deductions and credits only count if the money changes hands by December 31.
• Retirement account contributions, especially to a 401(k) or Solo 401(k), directly cut taxable income.
• Investment losses can offset gains, but the 30 day wash sale window applies.
• Checking your withholding now can prevent a surprise bill or an unnecessary refund delay.
• Business owners can still buy equipment or prepay expenses to shrink this year's tax bill.

Pulling Deductions Into This Year

One of the simplest ways to raise a refund is to move next year's bills into this one. Taxpayers who itemize might get pushed past the standard deduction threshold by prepaying certain expenses before the ball drops on December 31. For 2025, the standard deduction sits at $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household. Anyone whose itemizable costs already clear those numbers benefits from itemizing outright; anyone close to the line might get there by prepaying.

Prepaying Mortgage Interest and Property Taxes

Lenders sometimes allow homeowners to send in January's mortgage payment early, which lets the interest portion get deducted on the 2025 return instead of waiting a year. Property taxes work similarly, though it pays to check state rules on when a payment officially counts toward the tax year.

Bunching Charitable Gifts

Donors near the itemization threshold can bunch several years of giving into one calendar year, say, contributing $6,000 now rather than $3,000 annually, to clear that limit. The gift has to be completed by December 31. For credit card donations, the date of the charge is what matters, even if the statement isn't paid until January.

Prepaying Medical Costs

Out of pocket medical expenses only count once they exceed 7.5% of adjusted gross income, which is why many people never bother tracking them. But someone who has already had a costly medical year might get over that line by prepaying a January appointment or procedure. Dental work, vision care, and prescriptions all count toward the total.

Using Retirement Accounts to Cut Taxable Income

Money placed into retirement accounts serves two purposes at once: it reduces this year's tax bill and builds savings for later. Contributions to a traditional IRA or a 401(k) lower taxable income directly, meaning less is owed when the return gets filed.

401(k) Contributions

A 401(k) accepts pretax dollars, which lowers current taxable income while the funds grow tax deferred until retirement. Many employers also kick in a match. The 2025 contribution limit is $23,500 for anyone under 50. Catch up contributions raise that ceiling for older savers: workers age 50 to 59 can add another $7,500, for a total of $31,000, while those age 60 to 63 can add $11,250, bringing the total to $34,750. Contributions are counted in the year they're actually made, so anyone hoping to squeeze in more before year end should check with their employer about payroll cutoff dates.

Traditional and Roth IRAs

Traditional IRA contributions can lower this year's tax bill depending on income, while Roth contributions offer no immediate break but produce tax free withdrawals down the road. The choice comes down to when the tax benefit is more useful. The 2025 limit is $7,000, or $8,000 for savers 50 and older, and there's until April 15, 2026 to fund an IRA for the 2025 tax year. Roth contributions start phasing out once modified AGI reaches $150,000.

HSAs and FSAs

A health savings account pairs with a high deductible health plan and lets money go in, grow, and come out tax free for medical costs, with no expiration on the funds. The 2025 limit is $4,300 for individuals and $8,550 for families. Contributions can technically continue until April, but payroll based contributions often stop in December. Flexible spending accounts work differently: unused money is typically forfeited, so anyone with FSA funds left over should spend them by December 31 on eligible items like glasses, dental work, or prescriptions.

Balancing Gains and Losses in a Portfolio

Anyone who sold investments at a profit this year owes capital gains tax on that money, but tax loss harvesting can reduce or wipe out the bill by pairing losing positions against those gains.

How the Offset Works

Selling investments that dropped in value before year end creates realized losses that cancel out capital gains dollar for dollar. If losses run higher than gains, up to $3,000 of the extra can offset ordinary income, and anything beyond that carries forward to future tax years.

The Wash Sale Trap

Claiming the loss requires steering clear of the wash sale rule, which disallows a loss if the same or a substantially identical security gets repurchased within 30 days before or after the sale. Investors who want to stay invested without violating the rule sometimes sell one fund, an S&P 500 index fund, for example, and immediately buy a similar but not identical one. The original security can't be repurchased for at least 31 days. This kind of harvesting matters most when gains are large or the market has been especially volatile; it's pointless inside tax advantaged accounts like IRAs, where gains and losses don't touch the tax bill anyway.

Fixing Withholding and Estimated Payments Before Year End

The last weeks of December are the final chance to adjust how much tax gets paid this year, whether that means avoiding an interest free loan to the government or dodging a nasty surprise in April.

For Employees: Withholding

Paycheck withholding is set by a W4 form, and a raise, a new side gig, or a change in a spouse's job can make that form outdated fast. Caroline Hartmann, a CPA, said,