10 Year-End Tax Planning Opportunities

Key Takeaways  

• Don’t forget about retirement catch-up contributions if you’re over age 50, especially if between age 60 and 63.  

• When giving to charity, consider appreciated stock instead of cash. As your advisor about donor-advised funds and qualified charitable distributions.  

• Harvest investment losses to offset gains and review asset location for maximum tax efficiency.  

• Take advantage of the expanded $40,000 SALT deduction if you're a homeowner in a high property tax location. 

  
  

The final months of the year are a great time to review your financial picture and take advantage of strategies that can reduce your tax bill and strengthen your long-term plan. A few thoughtful moves now can make a meaningful long-term impact. Here are ten of my favorites: 

1. Maximize Retirement Contributions. If you participate in an employer-sponsored retirement plan, confirm you’re contributing as much as possible before year-end. In 2025, the contribution limit for 401(k) plans is $23,500, with an additional $7,500 catch-up contribution for those age 50 and older. NOTE: Those of you between the ages of 60 and 63 can make a special “super” catch-up contribution of $11,250 per year, instead of $7,500, for each of the four years in which you are in your early 60s. If your employer offers both traditional and Roth options, consider shifting all or part of your contributions to a Roth 401(k). This can help build your tax-free assets.  

NOTE: Some employers offer current employees the option of making additional deferrals to retirement accounts beyond the yearly limits -- up to an additional $46,500 per year in after-tax contributions for 2025 via a Backdoor Roth. This strategy works well with large organizations that allow for excess compensation deferral and in-service withdrawals. Small to midsize business owners could have limitations due to certain testing requirements. You have until April 15, 2026, to make catch-up contributions for 2025.

Action: Check your current deferral rate and increase it if you can before the last payroll of the year. 

2. Make a Spousal IRA Contribution. This strategy is useful when either you or your spouse does not have access to an employer-sponsored retirement plan. Some employers don’t offer retirement plans, or maybe you have your own business with no retirement plan set up. A spousal IRA contribution is also useful when one spouse is not working, which can limit their ability to save for retirement. A spousal IRA is a great way to keep saving. Usually, the rule for contributing to an IRA is that you must have some type of earned income. The spousal IRA strategy allows you to use your or your spouse’s income to bypass that rule on behalf of the other person. Your spouse can contribute $7,000 to the spousal IRA or $8,000 if you are over age 50. 

Action: If you qualify, consider contributing to each spouse’s IRA before the April 2026 deadline for 2025 contributions. 

3. Consider a Backdoor Roth IRA. High earners who exceed the Roth IRA income limits ($150,000 single/$236,000 for joint filers) can still build tax-free retirement savings through a backdoor Roth. This involves making a non-deductible contribution to a traditional IRA and then converting those funds to a Roth IRA. Once in the Roth, the funds can grow tax-free and be withdrawn tax-free in retirement. This approach can be especially effective for people who don’t have traditional IRA balances. NOTE: If you have a traditional IRA, this conversion can trigger a taxable event and should be discussed with your accountant before proceeding. 

Next week's post by Ryan Dunn, will explore this topic in more depth.

 4. Spend Remaining Flexible Spending Account (FSA) Dollars. During open enrollment, select a high-deductible health plan (at least $1,700 single/$3,400 family for 2026) so you can establish a Health Savings Account (HSA) and potentially fund an FSA.  

If you participate in a health care or dependent care FSA, now’s the time to check your balance. Because FSAs are “use it or lose it” accounts, any unspent funds may be forfeited after year-end unless your plan allows a limited carryover. Eligible expenses often include prescriptions, dental care, glasses, and childcare. 

Action: Review your plan rules and schedule any last-minute appointments or health-related purchases before December 31, before your new deductible goes into effect. 

5. Review Charitable Giving Plans:  

a. Gifting appreciated stock instead of cash. Year-end giving can be personally meaningful AND tax efficient. If possible, consider donating appreciated securities rather than cash. By gifting investments that have increased in value, you can avoid paying capital gains tax on those investment gains while still receiving a deduction for the full fair market value of your donation.

b. Gift Via a Donor Advised Fund (DAF) Rather than Directly to a Charity. Contributing to a DAF allows you to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to your favorite charities over time. This can be especially useful in higher-income years or when you want to “bunch” multiple years of charitable giving into one tax year to maximize itemized deductions. See my colleague Ryan Vogel’s recent post for more about bunching donations and other charitable giving techniques.  

c. Make a Qualified Charitable Deduction (QCD). A qualified charitable distribution (QCD) is a direct transfer of funds from your IRA to a qualified charity, and the distribution is excluded from your gross income. The amount of the QCD (up to $108,000 per year per person, $216,000 MFJ) can be used to satisfy all or part of your required minimum distribution (RMD) for the year, but it does not count as taxable income and does not require you to itemize deductions. Most people think you can only make a QCD when you start your required minimum distributions (RMDs), typically at age 73 (or age 75, depending on the year you were born). What many people don't realize is that you can start making QCDs once you reach age 70.5. Doing so at age 70.5 is a good way to reduce the balance in your traditional IRA, and that helps reduce your future required distributions. QCDs can also help to keep your income below the IRMAA (Income-Related Monthly Adjustment Amount) threshold, in which an extra charge is added to your Medicare Part B and Part D premiums if your modified adjusted gross income (MAGI) is above $106,000 for individuals in 2025 and $212,000 for MFJ.  

 6. Tax-Loss Harvesting. Review your investment accounts for opportunities to sell stocks that have lost value for you to offset gains. If you have more capital losses than capital gains — or no capital gains at all — you may offset up to $3,000 ($1,500 if married and filing separately) of your ordinary income with capital losses. If you have more than $3,000 in losses, you may be able to carry the excess amount into future years unless you are a resident of New Jersey, North Carolina, or Alabama.  

7. Consider a Mutual Fund to ETF Exchange: A mutual fund to ETF exchange involves a fund company converting a mutual fund into an exchange-traded fund, which is often structured to be tax-free for existing shareholders. Key benefits for investors include lower costs, tax efficiency due to fewer capital gains distributions, and intraday trading flexibility. You will need a brokerage account to hold the ETF, as they trade on an exchange. You will also need to work with your investment company to make this shift. A mutual fund to ETF exchange is a rare technique only offered by a handful of fund companies. However, it has become more widely available since Vanguard’s patent expired. 

8. Don’t let excess 529 account balances sit idle. If you have the good fortune to have excess funds in your child’s (beneficiary’s) 529 college savings account and the beneficiary is now employed, the funds can be rolled over to a Roth IRA for the beneficiary. This allows the money to grow tax-free in the beneficiary’s account, assuming the 529 account was held for at least 15 years. Just note, you cannot roll over more than the beneficiary has in employment income in a given year, and there is a lifetime $35,000 limit on this strategy.  

9. See if you can implement asset location preferences. This would simply be a review to make sure you have your least tax-efficient assets in your qualified accounts* (Real estate, taxable fixed income, and private credit) and most tax-efficient assets in your taxable accounts such as a brokerage account (domestic US stocks and international core stocks, etc.).     * 401(k)s, traditional IRAs, Roth IRAs, and pensions.   

ACTION: If you think you may have assets in the wrong location, don’t try to fix the situation on your own. Ask your investment counsel if they are providing a tax-efficient investment strategy. If they are not, simply ask them if they could do it for you.   

10. Monitor income against the expanded SALT deduction. As part of the recently passed One Big Beautiful Bill Act, the cap on state and local tax deductions was raised to $40,000 a year from $10,000. This is a huge benefit for homeowners in states with high property taxes, such as New Jersey and New York. Just know that if you’re a high earner, the deduction phases out once your modified adjusted gross income exceeds $500,000. The increased cap is reduced by 30 cents for every dollar your MAGI is over the threshold. So, if you’re close to that threshold, you’ll want to consider increasing charitable deductions, deferring income into later years, or other techniques mentioned above. 

Conclusion 

Taking time to review your finances before December 31 can have a meaningful effect on both your current tax bill and long-term goals. These year-end tax planning opportunities—from maximizing retirement contributions and optimizing charitable giving to reviewing investment positions and monitoring SALT deductions—are designed to help you strengthen your overall financial picture. If you or someone close to you would like a second look at your asset allocation or tax strategy, please contact us anytime to discuss. We’re here to help you make informed decisions with confidence.

 ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth