Tax planning involves looking for opportunities to improve your tax situation BEFORE the end of the year. Don’t miss out this year! By anticipating your current and future tax brackets, the aim is to pay taxes when the rates are the lowest.
Tax Bracket Uncertainty Is Gone
Due to the passage of the One Big Beautiful Bill Act earlier this year, the income tax brackets are now permanent (at least for the foreseeable future). So, look at your income each year - if it is likely to be a higher or lower income year - defer or accelerate income accordingly.
For example: If your income is higher in 2025 than most years, consider taking actions that can lower it - like harvesting capital losses or making tax-deductible retirement contributions - see below for more ideas.
Harvest Capital Gains and Losses
Tax-loss harvesting is the process of selling investments at a loss to offset capital gains. You can offset up to $3,000 of ordinary income with net losses, and excess losses can be carried forward to future tax years.
Consider harvesting gains if you’re in the 0% capital gains bracket (income under $96,700 for Married Filing Jointly, $48,350 for Single filers). These gains still impact your overall Adjusted Gross Income (AGI) and could be subject to state income taxes.
Maximize Retirement Contributions
The deadline for 401(k)s and other workplace plans is December 31st, but you have until April 15, 2026 to contribute to an IRA for 2025. You can contribute $23,500 to a 401(k) and $7,000 to an IRA.Turning 50 or older this year?If so, you can stash an extra $7,500 to $11,250 in a 401(k) depending on your age and if your plan allows it. IRAs allow an extra $1,000 contribution for the 50+ crowd as well.
SEP-IRAs and Solo 401(k)s can be a great option for the self-employed, where those who qualify can make contributions up to 25% of net earnings (maximum $70,000).
Charitable Giving
You can bunch charitable deductions into one year if you could use the deduction, and if you want to delay when the money goes to the charities, a donor-advised fund (DAF) could be helpful.
Other common gifting strategies include donating appreciated investments instead of cash, so you also avoid the capital gains tax you would otherwise have with a sale and then gifting the cash.
If you are over age 70½ you can make Qualified Charitable Distributions (QCDs) from IRAs, or Turn Your RMDs Into Charitable Donations.
Roth IRA Conversions
Consider converting IRA Assets to a Roth IRA if you are in a lower tax bracket this year. You will need to pay the taxes on converting right away, but then the converted amount AND all of the future growth will become tax-free over time.
At Whitford Financial Planning,tax planning is a year-round event,and all we need to get started is a PDF of your most recent tax return!
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