Top year-end money moves
For freelancers & business owners
🥇 There’s still time to minimize taxes and maximize gains
Didn’t do much tax or financial planning this year?
Don’t worry. If you are self-employed as a freelancer or business owner, there’s still time for these 7 money moves before the year ends.
1. Maximize Tax-Deductible Retirement Contributions
Retirement contributions can be one of the biggest tax-breaks for freelancers and business owners. Every dollar contributed can reduce your Adjusted Gross Income (AGI). That can help reduce your federal, state and local tax liability. It may also help you qualify for additional credits and deductions.
What to do?
Fund a SEP IRA or a Solo 401k depending on your situation.
Maximize your contributions for maximum tax benefit.
For Solo 401(k), the total contribution limit for 2025 (employee + employer combined) is $70,000, or $77,500 if age 50+. While employer profit-sharing contributions can be made until your tax filing deadline, employee deferrals must be made by year-end.
SEP-IRA limits for 2025 are the lesser of 25% of compensation or $70,000.
Consider whether Traditional or Roth contributions make more sense given your current and expected future tax rates.
👉️ Need help deciding which one to do? Just respond to this email. We will be glad to help.
2. Consider timing big expenses & payments
If you use the cash-basis accounting method (most-common), then managing the timing of income and expenses strategically can help with reducing taxes.
What to do?
For example, you can defer invoicing or delay collecting payment on work completed in late December to push income into 2025 - if you expect to be in a lower tax bracket next year.
Similarly, you can accelerate collections if you expect to be in a higher tax bracket next year.
Prepay January business expenses in December (office supplies, insurance, subscriptions, equipment maintenance) to claim the deduction this year.
Be strategic about major equipment purchases. Section 179 and bonus depreciation may allow immediate expensing of qualifying assets placed in service by December 31 - resulting in a large one-time reduction in taxable income
3. Estimated Tax Payments
This final estimated tax payment is crucial for avoiding underpayment penalties and giving free cash to the IRS.
What to do?
Before December 31st, complete a full year-end bookkeeping review to project your total 2025 tax liability.
Use this projection to determine the exact amount needed for the final Q4 payment. The deadline for the final payment is January 15 for individuals (applies to owners of Sole Proprietorships, Single-Member LLCs, S-Corporations, and Partnerships ).
Review whether you've met the safe harbor rule (100% of prior year tax, or 110% if AGI exceeded $150,000) to avoid underpayment penalties.
4. Health Insurance & Medical bills
HSA accounts have a triple tax benefit. Contributions, growth and withdrawals (when used for qualified medical expenses) are all tax-free, making it the best retirement account out there.
What to do?
If you have an HSA, maximize contributions ($4,300 individual/$8,550 family for 2025, plus $1,000 catch-up if 55+) by December 31.
Pay outstanding medical bills before year-end if you're close to exceeding the 7.5% AGI threshold for medical expense deductions.
5. Loss Harvesting & Roth Conversions
Harvesting losses can be a powerful strategy to reduce taxes due to investment gains.
What to do?
Sell any securities that have lost value to generate capital losses in taxable investment accounts. These losses can help offset any realized gains and reduce your tax liability. You can deduct up to $3,000 in excess losses against ordinary income too - the rest gets carried over and can be used in future years.
Be mindful of wash sale rules if you plan to repurchase similar securities.
Consider Roth conversions if you had a lower-income year i.e. convert traditional IRA funds to Roth while in a lower bracket this year. This will allow you to pay taxes now - during a lower tax year - so that you can grow your wealth tax-free for the rest of your life.
6. Clean Up Your Books. Maximize the QBI Deduction
Ensure all your bookkeeping is clean to capture every last deduction and maximize the biggest benefit for pass-through income.
What to do?
Reconcile all expenses. Make sure to categorize transactions properly
Ensure proper documentation to claim the Qualified Business Income (QBI) Deduction.
If you used contractors, issue all necessary 1099-NEC forms to contractors you paid. Forms typically need to be issued if you paid any contractor more than $600 for their services
7. Charitable Contributions
Making charitable donations can reduce your taxable income, if you will be itemizing deductions
What to do?
Make charitable contributions by Dec 31. Consider donating appreciated stock instead of cash for a double tax benefit. You avoid capital gains tax and get a deduction for the full fair market value.
8. Education Savings
Contribute to 529 college savings plans by December 31 - if your state offers a state income tax deduction or credit for contributions. Many states provide tax benefits for 529 contributions. Check your state's specific rules and contribution limits for state tax benefits. Even without state tax benefits, funding a 529 now gives you an extra year of tax-free growth.
Consider “superfunding” a 529 plan. Superfunding allows you to contribute up to $95,000 ($190,000 for married couples) per beneficiary in 2025, without gift tax consequences, treating it as if made over five years.
7. Business Structure Optimization
If considering S-Corp election for 2025, research the requirements now so you can file Form 2553 within 75 days of your fiscal year start (or by March 15, 2025 for calendar-year businesses). This doesn't need to be done by December 31, but planning now is critical.
We can help!
If this feels overwhelming, you don’t have to do this alone.
Most freelancers and business owners have their hands full growing their business.
Working with a partner can save thousands of dollars and grow your wealth faster.
You work hard for your money. Make sure it works for you!
👉️ Book a call and let us show you how
Sumeet Ganju Sumeet Ganju is the founder of InverseWealth, a fee-only fiduciary RIA, where he helps tech operators and founders turn concentrated equity into lasting wealth. He writes here most Sundays.