Here are some ideas to consider as the year winds down.
Make the most of your charitable donations by contributing appreciated property, such as stocks. You can avoid the capital gains tax and you generally receive a deduction for the full value of the asset if owned for more than a year. The reduction in itemized deductions for high-income taxpayers could limit the tax benefit of your charitable contributions.
Review your investment portfolio for tax planning opportunities.
- If you’ve got unrealized losses you may want to consider selling those investments to offset any realized capital gains, since capital losses can be deducted up to capital gains plus $3,000. You should never base your investment plan solely on tax reasons. Be sure to consider your long-term investment strategy or consult with your investment advisor before making a decision.
- Don’t let the wash-sale rule limit your capital loss. Under this rule a capital loss isn’t allowed if you purchase substantially identical securities within 30 days before or after a sale. Purchases inside your IRA account and reinvested dividends are considered when determining if the wash-sale rule applies.
Make the most of itemized deductions by timing your deductions. If you generally cannot itemize, consider bunching your deductions into every other year by timing the payment of state income taxes, elective medical procedures, and charitable contributions. You may be able to itemize every other year, which could reduce your tax bill. Standard deductions are increasing, so be aware of the amount of deductions required to itemize.
The same idea works for business income. Delay billing your customers if you expect to be in a higher tax bracket this year than next. Also, business income can be managed to an extent by timing when business bills are incurred or paid.
Have you met your Required Minimum Distribution (RMD) from your IRA? If you support charities, consider having your IRA custodian make the distribution check payable to one or more charities. Qualified Charitable Distributions (QCD) are excluded from income, so even if you can't itemize deductions, you can still get a tax benefit from supporting a charity. Plus, QCD reduce your annual RMD! You must be 70 1/2 years old to make a QCD and the 2025 annual limit is $108,000 to one or more charities.
Have you contributed the maximum to your Health Savings Account (HSA)? If you're eligible, this is a great way to get a back-door tax deduction for your medical expenses. You must have a High Deductible Health Plan (HDHP) to contribute. If you qualify, contributions are tax deductible or pre-tax if through an employer, interest and investment earnings are tax-free, and withdrawals for qualified medical expenses are tax-free. You have until April 15, 2026, to make your 2025 contributions.
Have you made a retirement contribution for 2025? Contributions to an Individual Retirement Account can be made up to April 15, 2026, for 2025 and self-employed individuals and employers can make a SEP-IRA contribution up to the due date of their tax return, including extensions.
Perform a Federal Tax Withholding checkup. Make sure you have enough federal tax withheld for 2026. Use the IRS' free Tax Withholding Estimator or provide us with your most recent pay stub for a review.
