Now that the summer crowds have eased and the Cape Cod quiet gives you a moment to breathe, it’s the perfect time to give your tax plan a little attention. Whether you’re wrapping up a busy season or simply want to keep more of your hard-earned money, some proactive year-end tax planning now can make a significant difference.
In this post, we’ll walk you through six practical strategies that work for both individuals and business owners and highlight some Cape Cod and Massachusetts-specific tax opportunities you might want to pay attention to.
1. Boost Your Retirement Contributions Before December 31
As part of year-end tax planning, one of the easiest and most reliable ways to lower your taxable income is by contributing to your retirement account. If you have access to a workplace plan such as a 401(k), take a look at how much you’ve contributed so far this year. Many people set a percentage early on and forget to adjust it, but even a small increase in your final pay periods can add up quickly.
For 2025, you can contribute up to $23,500 to a 401(k) if you’re under 50, or $31,000 if you’re 50 or older thanks to catch-up contributions. Business owners can also set up a SEP IRA or solo 401(k), which allows them to contribute as both employer and employee. The limit for SEP IRAs is up to 25% of your compensation, capped at $70,000.
If your employer offers a match, make sure you’re contributing enough to get the full amount. It’s essentially free money that also reduces your taxable income. If you don’t have a workplace plan, consider opening a Traditional or Roth IRA before the tax deadline next spring. The sooner you contribute, the sooner your money can start growing tax-deferred.
Check out our Q4 Small Business Accounting Checklist for tips to close out the year efficiently.
2. Shift Income and Expenses to Manage Your Tax Bill
As part of year-end tax planning, if you expect your income to be lower next year, it may make sense to delay receiving additional income until January. Conversely, if you anticipate a higher income in 2026, you might want to pull some income into this year while your tax rate is still lower.
Business owners on the Cape often operate on a cash-basis accounting system, which makes this strategy especially flexible. You could delay sending out invoices until late December or prepay certain expenses such as insurance, rent, or supplies before the year ends.
For individuals, look for opportunities to prepay deductible expenses like property taxes or charitable donations, if it makes sense for your situation. Just remember that these strategies depend on your overall income level and whether you itemize deductions, so it’s best to run the numbers with your CPA before making large changes.
3. Make The Most of Charitable Giving and Investment Losses
As part of year-end tax planning, the end of the year is also a good time to review your charitable giving and investments. If you itemize deductions on your tax return, instead of taking advantage of the standard deduction, you should make any donations before December 31 so they count for this tax year. You could also consider donating appreciated securities instead of cash; you’ll get a deduction for the fair market value and avoid paying capital gains on the appreciation.
If you’ve realized gains in your investment portfolio, you might also consider selling investments that have declined in value. This strategy, called tax-loss harvesting can help offset gains and reduce your overall tax bill. But keep in mind that if you sell an investment at a loss, you’ll need to wait at least 30 days before buying the same stock or fund again. If you buy it back too soon, the IRS won’t let you count that loss on your taxes.
4. Review Your Business Structure and Depreciation Options
If you run a business here on the Cape, the last quarter is the right time to review your structure and major purchases. The decision to operate as an LLC, S-corporation, or sole proprietorship can have real tax implications, especially with changes in income or staffing. Your CPA can help you determine if electing S-corp status or adjusting how you take owner draws and payroll could help you save.
You should also look at your asset purchases before the year ends, for example, if you buy new equipment or vehicles and place them in service by December 31, you may qualify for accelerated depreciation under Section 179 or bonus depreciation rules. These deductions can reduce your taxable income significantly while still allowing you to invest in your business for the coming year.
5. Double-Check Your Withholding And Estimated Tax Payments
As part of year-end tax planning, before you close the books on the year, take a few minutes to check your withholding and estimated tax payments. If you’ve experienced a change in income, such as a large bonus or investment gain, it’s better to adjust your withholding now to avoid penalties later.
For self-employed taxpayers, it’s also a good time to make sure your quarterly estimated payments are on track. If you’ve earned more in the busy summer season than you expected, a small additional payment before year-end can help you avoid surprises in April.
6. Take Advantage Of Massachusetts Tax Breaks And Credits
Federal tax strategies are a great start, but Massachusetts has its own set of opportunities and quirks worth paying attention to, especially if you live or do business on Cape Cod, where property taxes and seasonal income patterns can have a big impact.
Use The Massachusetts SALT Cap Workaround (PTET Election)
The federal $10,000 limit on state and local tax deductions (the SALT cap) continues to catch many taxpayers by surprise. As part of year-end tax planning, Massachusetts offers a helpful workaround through the Pass-Through Entity Tax (PTET). If you own a partnership, S-corporation or LLC, you can elect to pay your state tax at the entity level. This allows the business to deduct the tax on its federal return, bypassing the $10,000 SALT limit on your personal return.
For Cape Cod business owners who often pay high property and income taxes, this election can make a meaningful difference. The decision should be made before the end of the year, so talk to your CPA soon to see if it’s right for you.
Know Your Property Tax And Real Estate Deductions
As part of year-end tax planning, property taxes on the Cape are no small expense, and the federal deduction for state and local taxes is capped at $10,000. While you can’t change that cap, it’s still worth tracking your payments carefully and confirming that you’re getting credit for everything you’re eligible for.
As part of year-end tax planning, Massachusetts also provides several valuable property-related benefits. Many towns in Barnstable and Plymouth Counties offer elderly exemptions, as well as additional relief for qualifying veterans and blind residents. If you’re a homeowner over age 65, don’t overlook the Senior Circuit Breaker Tax Credit, a refundable credit that reimburses part of your property tax or rent. For 2024, the maximum credit was $2,730, and it’s adjusted annually for inflation..
Claim Massachusetts Deductions For Rent, Commuting, and FICA
Massachusetts also offers smaller deductions that can quietly add up over the course of a year. As part of year-end tax planning, if you commute off-Cape for work, you can deduct up to $750 per person for tolls paid through an E-ZPass MA account or MBTA commuter passes. Renters can deduct 50% of rent paid, up to a maximum of $4,000, regardless of income.
Residents can also deduct their contributions to Social Security and Medicare (FICA), as well as certain education or medical expenses. These may not seem large individually, but taken together, they can make a noticeable difference when it’s time to file.
Plan Ahead For The Massachusetts Estate Tax Threshold
The Massachusetts estate tax threshold was increased to $2 million for estates of those who pass on or after January 1, 2023. That means estates under that amount are no longer subject to state estate tax, but for families with property and investments on the Cape, it’s still a limit that’s easy to reach.
If your estate is close to or above $2 million, proactive planning can help. Annual gifts to family members, charitable contributions, and the use of trusts can gradually reduce your taxable estate. While the federal estate tax doesn’t apply until much higher levels, the Massachusetts rules mean local planning is essential.
Schedule Your Year-End Planning Session With Us
There’s still time to make some tax moves before the year ends, but the window is closing fast. Whether you’re looking to boost retirement savings, explore the PTET election, or make the most of Massachusetts deductions, as part of year-end tax planning, a few proactive steps now can help you save substantially come tax time.
At Steven M. Ellard, CPA, we help individuals and small business owners across Cape Cod review their full tax picture and identify opportunities to save.
From retirement planning to state-specific deductions, we’ll make sure you finish the year on the strongest financial footing possible.
Book a call with our team today.
Until next time!