Year-End Tax Planning Moves That Could Save You Thousands

The final weeks of the year tend to blur together: holiday gatherings, gift shopping, travel plans. Before you know it, January arrives and you’re staring down tax season wondering what opportunities you missed.

Here’s the thing: the financial decisions you make (or don’t make) before December 31st can have a real impact on your tax bill and long term wealth. Let’s walk through some strategic moves worth exploring with your advisor while there’s still time to act.

Supercharge Your Retirement Savings

Think of your retirement accounts as powerful tax tools that work double duty. Every dollar you contribute to a traditional 401(k) or IRA may reduce your current taxable income while building your financial future.

For 2025, the contribution limit for 401(k)s is $23,500, or $31,000 if you’re 50 or older. If you’re between 60 and 63, you might qualify for even higher catch up amounts depending on your plan. Haven’t maxed out yet? A year end contribution boost could potentially lower what you owe come April.

Traditional IRAs have a $7,000 limit ($8,000 if you’re 50+). Even if you can’t hit the maximum, increasing your contribution by whatever amount fits your budget may make a difference.

The Roth Conversion Question

This strategy requires thinking a few moves ahead. If you expect your income, and therefore your tax bracket, to climb in the coming years, converting some traditional IRA funds to a Roth might be worth exploring.

You’ll pay taxes on the conversion amount this year, but once that money is in a Roth, it grows tax free and you won’t owe anything on qualified withdrawals in retirement. Year end is an ideal time to run the numbers with your advisor and see if a conversion makes sense for your particular situation.

Turn Market Volatility Into Tax Opportunities

No one enjoys seeing red in their portfolio, but losses can sometimes serve a purpose. Tax loss harvesting involves selling underperforming investments to offset gains you’ve realized elsewhere, potentially reducing your tax bill.

The key is being strategic about it. You can’t simply sell and immediately buy back the same investment; the IRS wash sale rule prevents that. But with thoughtful planning and guidance from your advisor, you may be able to reposition your portfolio while capturing valuable tax benefits.

Make Your Charitable Giving Work Harder

If you donate to causes you care about, there may be ways to amplify the tax benefit. One approach: bundling multiple years of donations into a single year. This “bunching” strategy can potentially push your itemized deductions above the standard deduction threshold.

Another option worth discussing with your advisor is donating appreciated stock instead of cash. This approach may help you avoid capital gains tax on the appreciation while still getting the full fair market value deduction. A donor advised fund lets you lock in this year’s tax deduction while distributing the funds to charities over time.

Don’t Let FSA Dollars Disappear

Check your Flexible Spending Account balance. Most FSA plans operate on a use it or lose it basis, meaning any unspent funds vanish at year end. Schedule that dental appointment, order new glasses, stock up on eligible medical supplies; whatever it takes to put your pre tax dollars to work before they evaporate.

Review Your Tax Withholding

Life changes throughout the year. Maybe you got a raise, changed jobs, got married, or started a side business. Any of these shifts can throw off your tax withholding, potentially leaving you with an unexpected bill or even underpayment penalties.

Taking time now to review your W4 or adjust your estimated payments with your tax professional can help prevent a tax time surprise. If you’ve underpaid, you may still have time to correct the course.

The RMD Deadline Is Firm

If you’re 73 or older, you must take your Required Minimum Distribution from tax deferred retirement accounts by December 31st. Missing this deadline can trigger a significant 25% penalty on the amount you should have withdrawn.

One option to consider: if you don’t need the RMD income, a Qualified Charitable Distribution might make sense. You can direct up to $108,000 from your IRA straight to charity ($115,000 in 2026), satisfying your RMD requirement without increasing your taxable income. Your advisor can help you determine if this strategy fits your situation.

Strategic Gifting for Estate Planning

You can gift up to $19,000 per person this year ($38,000 for married couples) without touching your lifetime estate tax exemption. This creates a potential way to transfer wealth to children, grandchildren, or other loved ones while potentially reducing your taxable estate.

Regular annual gifting, sustained over years, can move substantial assets out of your estate while you’re alive to see your generosity at work. Whether this approach makes sense depends on your overall estate plan.

The Value of Professional Guidance

Every financial situation is different. What makes sense for your neighbor might not fit your circumstances. The strategies that worked well last year might not be optimal this year.

That’s where professional guidance becomes essential. A financial advisor can analyze your complete picture (income, investments, retirement goals, estate plans) and help identify which year end moves might have the greatest impact for your specific situation.

The clock is ticking on 2025, but there’s still time to explore strategic options with your advisor. The question is: will you take action, or let another year slip by?

Your financial future is shaped by the decisions you make today. Connect with a Carter Financial Management advisor to discuss a personalized year end strategy that could position you for success in 2026 and beyond.

This content was created with the assistance of artificial intelligence (AI). While efforts have been made to ensure the quality and reliability of the content, it is important to note that AI-generated content may not always reflect the most current developments or nuanced human perspectives.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Carter Financial Management and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.

RMD’s are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.