Even though the calendar has flipped to 2025, there are still meaningful steps you can take to optimize your 2024 tax situation. High earners and business owners often have more planning opportunities than they realize. Between now and the April 15 tax filing deadline, you can still make smart moves to reduce your tax bill, build long-term wealth, and avoid costly mistakes. Whether you’re a highly compensated employee or you run your own business, here are some after-year-end planning strategies worth considering.

Employees with Equity Compensation and High Income

Fund a Roth IRA or Use the Backdoor Roth Strategy

If you have earned income in 2024, you may still be eligible to make a Roth IRA contribution for that year as long as you do so before April 15, 2025. Roth contributions are made with after-tax dollars, but the benefits are tax-free growth and tax-free withdrawals in retirement. High earners are often above the income limits to contribute directly to their Roth IRA. This is where the backdoor Roth IRA comes into play.

This strategy involves contributing to a traditional IRA (which has no income limit for non-deductible contributions) and then converting that amount to a Roth IRA. Timing and tax coordination matter here. You’ll want to avoid the backdoor Roth IRA strategy if you have money in a pre-tax IRA since you’ll be subject to the pro-rata rule when converting. This is a great option for those without pre-tax IRAs to build up their tax-free assets. A SIMPLE or SEP IRA is considered an IRA for these purposes, so be careful!

Max Out Your Health Savings Account (HSA)

If you were covered by a high-deductible health plan (HDHP) in 2024, you have until April 15, 2025, to contribute to a health savings account (HSA). HSAs offer triple tax benefits: your contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free. This means you could completely avoid taxes on money in your HSA. For 2024, you can contribute up to $4,150 for self-only coverage or $8,300 for family coverage, with an additional $1,000 catch-up if you were age 55 or older.

It’s often a smart move for high earners to pay for their current medical expenses out of pocket instead of using funds in their HSAs. This allows you to invest the account, turning it into a stealth retirement account for healthcare costs later in life. Maximizing contributions to your HSA is one of the most efficient ways to lower your 2024 taxable income before the filing deadline.

Track Your RSU Basis to Avoid Overpaying Taxes

If you had restricted stock units (RSUs) that vested and were sold in 2024, be careful when preparing your return. RSUs are taxed as ordinary income when they vest, and the fair market value at vesting becomes your cost basis. However, brokers administering RSU plans often misreport the basis on your 1099-B, which can result in paying tax again on the full value of the shares when you sell.

To prevent double taxation, make sure your tax preparer properly adjusts the basis to reflect the income you already reported. For example, if 1,000 RSUs vested at $100 per share, you should have $100,000 of W-2 income, and that same amount should be used as your cost basis if you sold those shares. Failing to adjust the basis can mean paying tax on a portion (or even all) of the $100,000 of RSUs again. This is a mistake we see all the time this time of year, and it can be avoided with good recordkeeping and a careful review of your tax documents.

Sell ISOs Strategically to Cover AMT

If you exercised incentive stock options (ISOs) in 2024 and held the shares through year-end, you may be facing an alternative minimum tax (AMT) liability. The bargain element (the difference between the exercise price and the fair market value at exercise) is an adjustment for AMT purposes, which can create an AMT liability even though you haven’t sold the shares. You’ll need to fill out Form 3921 to determine the impact your ISOs had on your AMT liability.

To cover this tax bill, you might consider selling some of those shares before the tax filing deadline, ideally through a qualified disposition—meaning you held the shares for at least two years from the grant date and one year from the exercise date. This can result in favorable long-term capital gains treatment on the bargain element and help generate liquidity to pay your AMT liability. If you can’t meet the holding period requirements, a disqualifying sale still produces cash, but you’ll want to carefully model the tax impact with your advisor.

Business Owners and Self-Employed Individuals

Set Up and Fund a Solo 401(k)

If you were self-employed in 2024 and haven’t yet established a retirement plan, it’s not too late. You can still set up and contribute to a solo 401(k) as long as you do so by the tax filing deadline, including extensions. The solo 401(k) allows both employee and employer contributions.

You can contribute up to $23,000 as the employee ($30,500 if age 50 or older) and up to 25% of your net business income as the employer, with a total cap of $69,000 for 2024. While the employee deferral portion typically must be elected by year-end, if you establish the plan before filing your return, you may still be able to contribute the employer portion and possibly the employee deferral for first-time plans thanks to recent changes under the SECURE 2.0 Act.

Make Employer Contributions to Your Solo 401(k)

If you already have a solo 401(k) in place, you have until your tax filing deadline—including extensions—to make the employer profit-sharing contribution for 2024. This is typically 20%-25% of your net business income, and it can significantly reduce your tax bill while boosting retirement savings.

Be sure to coordinate this contribution with your tax preparer, especially if you’re close to the overall limit. These contributions must be made in cash by the deadline, so it’s smart to review your business cash flow before the filing deadline to make the most of this opportunity.

Consider Using the Pass-Through Entity (PTE) Tax Election

Many high-income business owners are limited in how much state tax they can deduct on their federal return due to the $10,000 cap on state and local tax (SALT) deductions. However, many states have passed laws allowing pass-through entities to pay state tax at the entity level. This is known as the pass-through entity (PTE) tax election.

When your S-corporation or partnership pays the state income tax, the business gets to deduct it on the federal return, effectively bypassing the SALT cap. You as the owner then claim a credit on your state return. Each state has its own rules and deadlines, so it’s important to act early in 2025 if you haven’t already made the election or payment. For those in eligible states, this can result in meaningful federal tax savings. But before you take the election, it is worth considering how the PTE tax election negatively impacts your qualified business income (QBI) deduction and your ability to contribute to your retirement accounts.

Wrapping Up

The start of the new year is not just about looking ahead—it’s also your last chance to take meaningful action to optimize the previous year’s tax bill. Roth contributions, HSA funding, retirement plan setup, and proactive planning around equity compensation can all pay off when handled correctly. If you’re a business owner, the ability to make retroactive retirement contributions and strategic tax elections can significantly impact your 2024 taxes.

If you’re not sure which strategies apply to your situation, now is the time to talk to an advisor. These decisions are time-sensitive and can be complex, especially if you’re balancing equity comp, multiple income sources, and business ownership. Our team helps high-income earners and business owners navigate these opportunities every year. Book a call with us to review your financial situation before the window closes.

April 15, 2025, is less than 2 weeks away. Let’s make sure you’re not leaving money on the table.

Stay informed of any changes that may affect your financial life by working with a financial advisor. If you’d like help reviewing your tax situation and refining your overall financial plan, our team is here to assist. Reach out to us today to schedule an appointment, and let’s make sure your financial future is on the right track.