Year-End Tax Tip: The Right Way to Time Your Retirement Contributions

As we get close to the end of the year, many business owners start asking:

“Is there anything I can still do to lower my tax bill?”

Good news — yes, there is!One of the best year-end moves you can make is to take a closer look at your retirement contributions.

🕒 Why Timing Matters

Retirement plans aren’t just for the future — they’re one of the best ways to save on taxes right now.

But not all contributions follow the same deadline.There are actually two types of contributions you can make:

1. Employee contributions (your salary deferrals)

2. Employer contributions (the business portion)

Each follows its own timing rules — and understanding the difference can help you plan smarter.

💡 Employee Contributions — Do These by December 31

If you have a 401(k) or Solo 401(k), you can set aside up to $23,500 of your 2025 salary.

If you’re 50 or older, you can add another $7,500.And if you’re ages 60–63, the new SECURE 2.0 “super catch-up” lets you add up to $11,250 more.

The key:

Employee contributions must be made by December 31 to count for 2025.

That means if you want the deduction for next year, the money needs to come out of payroll before the year ends.

🧮 Employer Contributions — You Have More Time

The employer side of your retirement plan — such as a SEP IRA or the profit-sharing part of a Solo 401(k) — can be made later.

You have until your tax-filing deadline, including extensions, to make that contribution.

This gives you flexibility:You can plan the amount now, claim the deduction, and fund it later when cash flow allows.

💼 Thinking Bigger

If this was a strong year for your business and you’d like to put away more, you could look into a defined-benefit or cash-balance plan.

These allow much larger deductible contributions — sometimes $50,000 or more — depending on your age and income.

These plans take a little more setup, but the tax savings can be big.

✅ A Simple Year-End Checklist

Before December 31:

1. Review your payroll to make sure employee contributions are made.

2. Decide how much your business will contribute.

3. Set up a plan if you don’t already have one — that keeps your options open.

☕ Need Help Running the Numbers?

If you’re not sure how much you can still contribute or what type of plan fits you best, I’d be happy to help.

You can schedule a short year-end planning call or download my free 5-Step Year-Round Tax-Savings Checklist for more ideas you can still use before December 31.

✍️ Final Thought

A retirement plan is more than a savings tool — it’s a powerful way to lower your taxes and build financial freedom.

And the best part? You still have time to make it count for 2025.