11 Year-End Tax Moves Every Freelancer Should Make Before December 31

Most tax advice tells you what to do after the year ends. By then, the real opportunities are gone. The moves that save freelancers money happen in October, November, and December, when you can still control what lands on your return.

Start by estimating your liability. Everything else depends on knowing whether your income is higher this year or next.

1. Time Your December Income

Cash-basis freelancers report income when received. That is leverage.

Income higher this year than next? Invoice early, push for payment before December 31. Income higher next year? Hold invoices until January. A $10,000 payment arriving January 2 instead of December 31 saves $2,200 at a 22% rate.

2. Accelerate Deductible Expenses

Higher bracket this year? Pull purchases into December. Pay annual software subscriptions upfront. Prepay professional services for Q1 work. Order equipment you need anyway. IRS rule: prepaid expenses are deductible in the year paid as long as the benefit period does not extend more than 12 months beyond when it starts.

3. Establish Your Solo 401(k) Before December 31

This is the retirement deadline most people miss. SEP-IRA contributions can wait until your return due date, including extensions. For a Solo 401(k), the safe path is to have the plan established by December 31 of the tax year, even if you fund it later. Since SECURE 2.0, a sole proprietor with no employees can adopt a new plan after year-end and still make first-year employee deferrals - but only until the unextended April 15 due date, and only for the plan's first year. In every later year, your deferral election must be in place by December 31.

If you want a Solo 401(k) for this year and do not have one yet, set it up now rather than relying on the post-year-end window.

4. Buy Equipment Under Section 179

Under Section 179, you can deduct the full cost of qualifying business equipment placed in service this year. A laptop bought December 30 and used for business before year-end qualifies. Waiting until January 2 means waiting until next year's return.

5. Check If an S-Corp Election Makes Sense

The S-corp election for next year must be filed by March 15. Do the analysis now while you have a complete picture of this year's income. The math usually works around $80,000 or more in net self-employment income, depending on your state.

6. Write Off Uncollectable Receivables

Cash-basis freelancers generally cannot deduct bad debts (you never reported the income). But if you did report income and a client never paid, document the write-off before December 31.

7. Fund Your HSA

Enrolled in a high-deductible health plan? Contribute to your HSA before year-end to start earning returns sooner. For 2025: $4,300 for self-only coverage, $8,550 for family; for 2026: $4,400 and $8,750; plus a $1,000 catch-up in either year if you are 55 or older. You technically have until April 15, but earlier means more tax-free growth.

8. Harvest Capital Losses

Review business-related investments that have declined. Capital losses offset gains dollar for dollar. Up to $3,000 of excess loss offsets ordinary income per year, with the remainder carrying forward.

9. Verify Quarterly Payments

Add up your four estimated payments. Compare against 90% of this year's projected liability OR 100% of last year's (110% if last year's AGI topped $150,000). Short of both? Make a catch-up payment by January 15.

10. Review Home Office Square Footage

If you use the actual expense method and your office changed size this year, update measurements and photograph the space. Check utility rate increases and insurance costs that flow through your home office percentage.

11. Run S-Corp Payroll

S-corp owners who have not paid themselves enough salary need to fix that before December 31. The 50% W-2 wage limit for the QBI deduction uses wages reported by year-end. Under-paying yourself also creates reasonable compensation audit risk.

A few hours of planning in Q4 regularly saves more than any single deduction discovered in April.

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Sources

• IRS Publication 505: Tax Withholding and Estimated Tax - Year-end estimated tax catch-up payments, January 15 deadline
• IRS Publication 560: Retirement Plans - Solo 401(k) establishment and deferral deadlines (including the SECURE 2.0 §317 first-year rule for sole proprietors)
• IRC Section 179: Year-End Equipment Purchases - Must be "placed in service" before December 31
• IRS Rev. Proc. 2024-25 and Rev. Proc. 2025-19 - HSA limits: $4,300 / $8,550 (2025); $4,400 / $8,750 (2026)

Key year-end deadlines: Solo 401(k) establishment: December 31 (first-year deferrals for a sole proprietor's new plan: unextended due date, April 15). Section 179 equipment in service: December 31. Q4 estimated payment: January 15. SEP-IRA contribution: April 15 (or October 15 with extension).