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Year-End Planning Guide for Taxes: Strategic Moves Before December 31

As the year winds down, now is the time to take a proactive look at your financial picture and optimize your tax strategy before the calendar flips. Whether you’re a seasoned investor or just trying to stay ahead of April’s stress, thoughtful year-end planning can protect you from an unexpected tax bill and position you for a stronger year ahead.

Maximize Your Retirement Strategy

  • Consider Roth IRA conversions to move assets into a tax-free growth account. Although the conversion may generate taxable income in the current year, it can provide significant long-term tax advantages.
  • Review your contributions to retirement plans. If you’re close to the contribution limit, topping off will maximize the benefit of this tax deferral.

Turn Investment Losses into Tax Opportunities

  • Realize losses on underperforming investments (such as stocks or bonds) to reduce taxable capital gains. Losses that exceed gains can be carried forward and applied in future years.
  • Review your investment portfolio’s performance and adjust as needed to stay aligned with your risk profile, investment objectives, and tax strategy.
  • Consider U.S. Treasury securities, which pay interest exempt from state and local taxes, making them an attractive year-end option.

Use Deductions Wisely

  • If your itemized deductions won’t exceed the standard deduction this year, consider postponing certain expenses—like charitable contributions and real estate taxes—until next year, if possible, when they may provide greater tax benefits.
  • Health Savings Accounts (HSAs) provide three key tax advantages: contributions reduce taxable income, account growth is tax-free, and qualified withdrawals are also tax-free. Review your current contributions and plan ahead for next year to maximize your deduction.

Prepare for What’s Next

  • Start estimating next year’s tax payments, if any, and contributions—particularly for retirement plans and HSAs—to minimize your overall tax bill and help manage your cash flow.
  • New legislation has affected certain deductions, including raising the State and Local Tax (SALT) cap from $10,000 to $40,000 for married couples filing jointly. The New Clean Vehicle Credit, Previously-Owned Clean Vehicle Credit, and Qualified Commercial Clean Vehicle Credit will no longer apply to vehicles purchased after September 30, 2025. However, installing qualified refueling or recharging equipment—such as home EV chargers—placed in service before July 1, 2026, may qualify for the Alternative Fuel Vehicle Refueling Property Tax Credit.
  • New deductions are available for up to $12,500 of qualified overtime pay, $25,000 of qualified tips, and $10,000 of car loan interest, but such deductions are phased out as adjusted gross income increases.

Year-end planning isn’t only about determining what taxes you’ll owe for the year—it’s about positioning yourself for the future. Take this opportunity to work with your tax advisor, identify opportunities, and give yourself the gift of certainty and peace of mind come spring.

The tax strategies outlined above are for informational purposes only, and are not intended to provide, and should not be relied upon for tax, legal, or accounting advice. While implementing any of these strategies may benefit you, it is always recommended to seek advice from a professional before proceeding with any transactions. If you have any questions or want to explore any of these strategies, please do not hesitate to contact us at Lear & Pannepacker.