As the year draws to a close, high-income earners and near-retirees have a critical window to make strategic financial decisions that could significantly help reduce taxes and strengthen long-term wealth. Year-end planning isn’t just about avoiding surprises in April. It’s about leveraging opportunities before they disappear on December 31.
Below are seven strategies to consider before the clock runs out.
1. Execute a Roth Conversion
Converting traditional IRA or 401(k) assets to a Roth IRA can be a game-changer for future tax-free income. Why now?
- Lock in today’s tax rates: If you expect rates to rise, converting now could save thousands later.
- Reduce Required Minimum Distributions (RMDs): Roth IRAs aren’t subject to RMDs, giving you more control over withdrawals.
- Ideal in lower-income years: If you retired mid-year or had a slower year in business, your taxable income may be lower. This could make a Roth conversion more attractive.
Pro Tip: Calculate the conversion amount carefully to avoid jumping into a higher tax bracket. Work with your financial advisor to model scenarios.
2. Max Out Retirement Contributions
Don’t leave money on the table:
- 401(k): Contribute up to $23,500 for 2025, plus $7,500 catch-up if you’re 50+.
- SEP IRA or Solo 401(k): Perfect for business owners with variable income.
- Health Savings Account (HSA): Triple tax advantage… contributions are deductible, growth is tax-free, and withdrawals for medical expenses are tax-free.
Why it matters: These contributions can help reduce taxable income and may accelerate retirement savings.
3. Optimize Charitable Giving
Charitable strategies can help provide deductions:
- Donor-Advised Funds (DAFs): Bundle several years of giving into one tax year for a larger deduction.
- Qualified Charitable Distributions (QCDs): If you’re 70.5 or older, donate directly from your IRA to satisfy RMDs tax-free.
- Appreciated Assets: Donate stocks instead of cash to avoid capital gains tax.
Pro Tip: Pair charitable giving with a Roth conversion to offset the tax impact.
4. Harvest Losses and Gains Strategically
- Tax-Loss Harvesting: Sell investments at a loss to offset capital gains and up to $3,000 of ordinary income.
- Gain Harvesting: If you’re in a lower bracket this year, realize gains intentionally to reset your cost basis at a favorable rate.
Watch out: Avoid the wash-sale rule when repurchasing similar securities.
5. Review Estimated Taxes and Withholding
High earners often face underpayment penalties due to investment income or business earnings. Check:
- Estimated tax payments: Are you on track?
- Withholding adjustments: Especially important if you had a windfall or sold a business.
6. Plan for RMDs
If you’re 73 or older, Required Minimum Distributions must be taken by December 31 (unless it’s your first year). Missing the deadline can trigger a 50% penalty on the amount not withdrawn.
7. Explore Advanced Strategies
- Gifting: Use your annual gift exclusion ($19,000 per recipient in 2025) to reduce your taxable estate.
- Business Owners: Consider Section 179 deductions or bonus depreciation for equipment purchases.
- Trust Planning: High-net-worth families may benefit from irrevocable trusts for tax efficiency and legacy planning.
Why Act Now?
Tax planning is not just compliance—it’s strategy. The decisions you make today can impact your wealth for decades. Waiting until April could mean missed opportunities.
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requesting a complimentary initial consultation whenever it’s convenient for you.
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