December is often a blur of holiday parties, gift shopping, and family gatherings. However, amidst the festive chaos, a critical deadline approaches. December 31 isn’t just the last day of the calendar year; it is the strict cutoff for many financial moves that can save you money on taxes, boost your savings, and set you up for success in the coming year.
If you find your budget tight this month, consider exploring seasonal side hustles to help cover end-of-year expenses.
Taking a few hours now to review your finances prevents regrets when tax season arrives in April. You don’t need to be a Wall Street expert to make smart moves. Whether you are focused on paying off debt, building a nest egg, or simply trying to organize your budget, this checklist breaks down the essential tasks into manageable steps.
Audience Scope: This guide is for U.S. residents managing personal or household finances. If you have complex circumstances such as business ownership, high net worth, trusts, or international assets, we recommend consulting with a qualified financial professional.
Key Takeaways
- Beat the deadlines: Many tax-saving strategies, such as 401(k) contributions and charitable giving, must be completed by December 31 to count for the current tax year.
- Use it or lose it: Review your Flexible Spending Account (FSA) balance immediately to avoid forfeiting your hard-earned money.
- Optimize for next year: Adjusting your tax withholding and reviewing insurance beneficiaries now prevents headaches later.
- Review, don’t just renew: December is the ideal time to audit subscriptions, insurance policies, and debt payoff plans to stop financial leaks.
1. Spend Your Remaining FSA Funds
If you have a Healthcare Flexible Spending Account (FSA) through your employer, you likely face a “use it or lose it” rule. Unlike Health Savings Accounts (HSAs), which roll over indefinitely, FSA funds usually expire at the end of the plan year (often December 31). While some employers offer a grace period or allow a small amount (up to $640 for 2024) to carry over, you should not rely on this without checking your specific plan details.
Just as you might perform a spring financial cleanup, checking in now ensures your records are organized for the months ahead.
Log in to your benefits portal and check your balance. If you have leftover funds, schedule those overdue dentist appointments, get an eye exam, or stock up on eligible over-the-counter items. According to the Internal Revenue Service (IRS), eligible expenses include prescription glasses, contact lenses, first aid kits, sunscreen, and menstrual care products.
2. Maximize Employer 401(k) Matches
One of the most effective ways to build wealth is to ensure you are getting the full employer match on your 401(k). This is essentially free money—part of your compensation package that you only receive if you contribute enough yourself.
Understanding retirement planning strategies for your specific life stage can help you decide how to allocate these year-end funds.
Knowing how much you should have saved by your current age can help determine if you need to contribute more to meet your retirement goals.
Contributions to a 401(k) must generally be made by December 31 to count for the current tax year. Check your year-to-date contributions on your latest pay stub. If you haven’t hit the company match limit, talk to your payroll department immediately to see if you can increase your contribution percentage for the final pay periods of the year. While you likely cannot contribute to a 401(k) for the current year once the calendar flips to January, you can still contribute to an IRA until Tax Day (usually April 15).
3. Execute Charitable Giving Strategy
The holiday season is a popular time for giving, but to claim a tax deduction for your generosity, you must finalize your donations by December 31. This applies to cash donations, goods (like clothing or household items dropped at a thrift store), and stocks.
As you finalize your donations, make sure you also budget for holiday spending to ensure your seasonal generosity doesn’t derail your January finances.
If you itemize deductions rather than taking the standard deduction, these contributions can lower your taxable income. A popular strategy is “bunching” donations: combining two years’ worth of giving into a single calendar year to exceed the standard deduction threshold, then taking the standard deduction the following year. Ensure you get receipts for all donations, especially those over $250.
4. Review Portfolio for Tax-Loss Harvesting
If you have investments in a taxable brokerage account (not a retirement account like an IRA or 401k), look for investments that have lost value. Selling these underperforming assets allows you to realize a loss, which you can use to offset capital gains you realized earlier in the year.
If your losses exceed your gains, you can use up to $3,000 of the excess loss to offset your ordinary income, such as your salary. Investopedia notes that tax-loss harvesting is a sophisticated strategy that requires awareness of the “wash-sale rule,” which prevents you from claiming a loss if you buy a substantially identical security within 30 days before or after the sale.
5. Consider a Roth IRA Conversion
If your income was lower than usual this year—perhaps due to a layoff, a sabbatical, or returning to school—you might be in a lower tax bracket. This presents a strategic opportunity to convert some of your traditional IRA funds into a Roth IRA.
When you convert, you pay income tax on the amount converted now, while your tax rate is low. In exchange, that money grows tax-free, and qualified withdrawals in retirement are tax-free. This move must be completed by December 31. Always calculate the estimated tax bill before proceeding to ensure you have the cash on hand to pay it without dipping into your retirement savings.
6. Take Required Minimum Distributions (RMDs)
If you are age 73 or older, you generally must take Required Minimum Distributions (RMDs) from your traditional IRAs and 401(k)s by December 31. Failing to withdraw the required amount results in a steep penalty—essentially an excise tax of up to 25% of the amount you failed to withdraw.
According to AARP Money, the deadline for your very first RMD is April 1 of the year following the year you turn 73, but for all subsequent years, the deadline is December 31. If you have already taken your first RMD, ensure your current year’s distribution is processed before the ball drops.
7. Audit Your Tax Withholding
Did you receive a massive tax refund last year? While it feels like a bonus, it actually means you gave the government an interest-free loan all year. Conversely, did you owe a large unexpected amount? That signals you didn’t withhold enough from your paycheck.
Use the end of the year to adjust your W-4 form with your employer. The IRS offers a Tax Withholding Estimator tool that helps you calculate the correct amount to have withheld from your paycheck. Submitting a new W-4 in December ensures your paychecks in January are accurate, smoothing out your cash flow for the new year.
8. Top Up 529 Education Plans
If you are saving for a child’s education, contributing to a 529 plan before year-end can yield state tax benefits. over 30 states offer a tax deduction or credit for 529 plan contributions, but the money typically must be in the account by December 31.
Review your state’s specific rules. Some states allow you to deduct contributions made to other states’ plans, while others only incentivize their own. Grandparents and other relatives can also contribute, making this a smart financial alternative to traditional holiday gifts.
9. Perform a Subscription and Membership Audit
Companies love the “set it and forget it” model because consumers often forget they are paying for services they no longer use. December is the perfect time to review your bank and credit card statements for recurring charges.
To prevent these costs from creeping up again, consider using budgeting apps that help you save by flagging recurring charges automatically.
Look for:
- Streaming services you rarely watch.
- Gym memberships you haven’t used since February.
- App subscriptions that renewed automatically after a free trial.
- Magazine or software subscriptions.
Cancel what you don’t need immediately. Even saving $20 a month adds up to $240 a year—money that could go toward debt or savings.
10. Check Your Credit Reports
Financial health includes protecting your identity and ensuring your credit history is accurate. You are entitled to a free weekly credit report from each of the three major bureaus (Equifax, Experian, and TransUnion) through AnnualCreditReport.com. This is the only source authorized by federal law.
Once you finish this year-end review, keep the momentum going by scheduling a spring financial cleanup to keep your records tidy all year long.
According to the Federal Trade Commission (FTC), checking your report allows you to spot identity theft early. Look for accounts you didn’t open or inquiries you didn’t initiate. Dispute any errors you find immediately, as these can drag down your credit score and impact your ability to get loans or housing.
11. Update Insurance and Account Beneficiaries
Life changes such as marriage, divorce, the birth of a child, or the death of a loved one require administrative updates. Your will does not always override the beneficiary designations on your financial accounts. If your ex-spouse is still listed as the beneficiary on your life insurance policy or 401(k), they could legally inherit that money regardless of your current wishes.
Log in to your investment accounts, bank accounts, and insurance policies. Verify the primary and contingent beneficiaries. It takes five minutes but protects your legacy and your family’s future.
12. Replenish Your Emergency Fund
If you had to dip into your emergency savings this year for car repairs or medical bills, that is exactly what the fund is for. However, you must prioritize refilling it. Entering a new year with a depleted safety net leaves you vulnerable.
You can accelerate your savings by starting one of many money-saving challenges on January 1st.
According to the Consumer Financial Protection Bureau (CFPB), an ideal emergency fund covers three to six months of expenses. If that feels impossible, start smaller. Aim to get back to $1,000 as quickly as possible to cover minor shocks, then build from there. Set up an automatic transfer for January 1 to restart the habit.
13. Redeem or Utilize Credit Card Rewards
Check your credit card reward balances. Cash-back, points, and miles sometimes have expiration policies, or they may lose value if the program terms change. Do not hoard points indefinitely.
If you are tight on cash for the holidays, redeem your points for statement credits to offset gift purchases. Alternatively, use them to buy gift cards for others. Using points you’ve already earned keeps you from adding new debt to your credit cards during the shopping season.
14. Specialized Debt Payoff Assessment
Review your progress on debt repayment. If you have high-interest credit card debt, calculate exactly how much you owe and the interest rates for each card. This reality check can be painful, but it is necessary for planning.
If the festive season left you with a balance, start planning your holiday debt recovery now to start the new year on a clean slate.
Decide on a strategy for the coming year. The “Avalanche Method” (paying highest interest first) saves the most money mathematically. The “Snowball Method” (paying the smallest balance first) builds psychological momentum. Choose the one that keeps you motivated. If your interest rates are punishingly high, research if a 0% balance transfer card is a viable option for you.
“A budget is telling your money where to go instead of wondering where it went.” — Dave Ramsey
15. Calculate Your Annual Net Worth
Tracking your net worth once a year gives you a high-level view of your financial trajectory. It is a simple calculation: Assets (what you own) minus Liabilities (what you owe).
This snapshot is a vital part of creating your first financial plan and tracking progress over time.
- Assets: Cash, savings, retirement accounts, home equity, car value.
- Liabilities: Mortgage, student loans, credit card debt, car loans.
Do not get discouraged by the number. The goal is to see an upward trend over time. Comparing your net worth on December 31 of this year to December 31 of last year is the best way to measure true financial progress, regardless of income fluctuations.
Year-End Deadlines at a Glance
| Deadline | Action Item | Why It Matters |
|---|---|---|
| Dec 31 | 401(k) Contributions | Last day for contributions to count toward current tax year limits. |
| Dec 31 | Charitable Donations | Must be executed by year-end for tax deductions. |
| Dec 31 | FSA Spending | “Use it or lose it” deadline for most flexible spending accounts. |
| Dec 31 | Roth Conversions | Conversion must happen in the calendar year to apply to that year’s taxes. |
| Dec 31 | Required Minimum Distributions | Deadline for taking mandatory withdrawals for those 73+. |
| Dec 31 | Tax-Loss Harvesting | Trades must settle to offset gains for the tax year. |
| April 15 (Next Year) | IRA / HSA Contributions | You have until Tax Day to contribute for the previous year. |
When to Consult a Financial Professional
While many of these items are DIY-friendly, certain situations require expert guidance to avoid costly mistakes. Consider consulting a Certified Financial Planner (CFP) or a CPA if:
- You own a business: Business tax structures and deduction rules are complex and change frequently.
- You experienced a major life event: Marriage, divorce, the death of a spouse, or receiving a large inheritance changes your tax and estate planning picture significantly.
- You have complex compensation: If you receive stock options (RSUs, ISOs) or deferred compensation, the tax implications are intricate.
- You are near retirement: The transition from accumulation (saving) to decumulation (spending) requires a sustainable withdrawal strategy.
You can find qualified professionals through the Certified Financial Planner Board or seek credit counseling assistance from the National Foundation for Credit Counseling (NFCC).
Frequently Asked Questions
Can I contribute to my IRA after December 31 for the current year?
Yes. Unlike 401(k)s, the IRS allows you to contribute to a Traditional or Roth IRA until the tax filing deadline (typically April 15) and still apply it to the previous year. This gives you extra time to gather funds if cash is tight in December.
What happens if I don’t spend all my FSA money?
Generally, you lose it. However, some plans offer a “grace period” (usually 2.5 months) or a “carryover” option (allowing you to keep up to $640 for 2024 plans). You must check with your HR department to see which option, if any, your employer offers.
When should I consult a professional about year-end planning?
You should consult a professional if you are unsure about tax-loss harvesting rules, if you are considering a large Roth conversion, or if your income sources have become complicated (e.g., freelance income mixed with W-2 income). A CPA can run projections to prevent surprise tax bills.
What are the risks of tax-loss harvesting?
The main risk is violating the “wash-sale rule.” If you sell a security at a loss and buy a “substantially identical” one within 30 days before or after the sale, the IRS disallows the loss deduction. Additionally, you should not let tax tails wag the investment dog—don’t sell a good investment solely for a tax break if it disrupts your long-term strategy.
Does credit card debt affect my year-end taxes?
Generally, no. Personal credit card interest is not tax-deductible. However, paying it down improves your financial health. The only exception is if the credit card expense was purely for business purposes, in which case the interest might be deductible as a business expense.
Should I pay off my mortgage early before year-end?
This depends on your interest rate and liquidity. If your mortgage rate is 3% but high-yield savings accounts are paying 4% or 5%, mathematically you are better off keeping the cash. However, if you are close to paying it off and value the peace of mind, making a lump sum payment is a personal choice.
How do I check my 401(k) contribution limit?
Check your pay stubs to see your Year-To-Date (YTD) contributions. Compare this against the IRS annual limit (for 2024, the limit is $23,000 for those under 50, and $30,500 for those 50+). Do not exceed this limit, as correcting excess contributions can be a bureaucratic headache.
Last updated: January 2026. Information accurate as of publication date. Financial regulations, rates, and programs change frequently—verify current details with official sources.
This article was reviewed for accuracy by our editorial team.
For trusted financial guidance, visit
Consumer Financial Protection Bureau (CFPB),
Internal Revenue Service (IRS),
Investopedia,
AARP Money and
Federal Trade Commission (FTC).
Important: EasyMoneyPlace.com provides educational content only. We are not licensed financial advisors, tax professionals, or registered investment advisers. This content does not constitute personalized financial, tax, or legal advice. Laws and regulations change frequently—verify current information with official sources.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Individual financial situations vary, and we encourage readers to consult with qualified professionals for personalized guidance. For those experiencing financial hardship, free counseling is available through the National Foundation for Credit Counseling.
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