Reviewing your tax situation before year-end is essential because it allows you to find and fix any issues before key deadlines and get ahead of the upcoming tax season. Yet, it can be challenging to prioritize this task during such a busy time. At Golden Road Advisors, we schedule pay stub and retirement income reviews with clients to do it together. Below is our year-end tax planning checklist, so you know what to expect or what you can explore on your own.
Preparing for Year-End Tax Planning
The objective of end-of-year tax planning is to determine how much income you expect to receive before year-end and how that compares to your financial goals, so you can develop strategies to maximize your wealth and minimize costs. Doing this in the fall is best as it allows time to make year-end tax moves.
We can affect things in essentially two ways:
- Control your taxable income (reducing or increasing what you will receive, depending on the average tax rate), and
- Offset taxable income by taking all possible tax deductions.
Therefore, to prepare for this work, gather the following:
- A current paystub (if you are working)
- A tally of all other ordinary income you will receive this year, such as:
- Business Income
- YTD salary, plus YTD profit and loss statement.
- Interest Income
- Rental Income or Royalties
- Required Minimum Distributions (from retirement accounts)
- Social Security Income
- Pension Income
- Annuity Income
- Business Income
- An estimate of any income or losses you will incur in taxable investment accounts before year-end (capital gains distributions from mutual funds typically occur in November and December)
- Any income or losses from the sale of assets or stocks, or stock grants from your employer that vested.
Then, pull it all together to get a sense of the overall picture.
What is your projected average tax rate?
Are you taking advantage of all opportunities to build wealth? Do you expect a high or low tax year? Does it make sense to defer income opportunities, thus reducing your tax bill? Conversely, should you consider accelerating income for this tax year?
Consider these questions (and more), then, depending on your circumstances, explore whether the following strategies can help. You can also download our year-end tax planning checklist to keep key dates at your fingertips.
Year-End Tax Planning Strategies
1. Update Paycheck Withholdings
Updating your withholdings is vital if you have experienced significant changes this year. You could get a surprise tax bill if you don’t withhold enough. If you withhold too much, it’s like giving an interest-free loan to the government. What can trigger this issue?
- A job change
- A raise or a huge bonus
- The birth of a child or a change in your child’s dependency status.
- A divorce
- A death
Taxes are typically the last thing we think of when these events occur. However, now is the time to make any necessary tweaks.
2. Maximize Your Retirement Savings Opportunities
Ensure you have taken full advantage of your retirement savings opportunities. If you are in a position to contribute the maximum amount to these accounts, please do. You can add funds on a pre-tax basis, thereby reducing your taxable income. Or, there are after-tax options, such as Roth accounts, to consider carefully.
If you cannot afford to maximize your retirement plan contributions, at least take advantage of any employer-matching opportunities. For example, if your employer matches contributions up to 3% of your eligible compensation and you earn $100,000 annually, aim to tuck away at least $3,000. Your employer will also contribute $3,000, doubling your money immediately.
The individual contribution limits (and deadlines) set by the IRS are as follows:
- 401(k) Contribution Limits (2025)
- $23,500 (plus $7,500 for people age 50 or older, or $11,250 for those age 60-63)
- Must occur by December 31, 2025
- Please note: To save even more, check if your 401(k) plan allows after-tax contributions. The total IRS limit for 401(k) contributions is $70,000 ($77,500 for those 50 and older, or $81,250 for those age 60-63). You can contribute up to that limit if your plan permits after-tax contributions and employee + employer contributions are less than $70,000.
- IRA Contribution Limits (2025)
- $7,000 (plus $1,000 for people 50 or older)
- Must occur by April 15, 2025
If your company offers a Roth 401(k) or you are eligible for a Roth IRA, I suggest you carefully consider it. Roth retirement accounts only take after-tax dollars. So you sacrifice the tax break today, but your earnings grow tax-free forever, leading to a more tax-efficient nest egg in retirement. If your projected average tax rate is low enough (say under 25%), a Roth might lead to better long-range financial outcomes.
If you make too much to contribute directly to a Roth IRA, the strategy we’ll share next is potentially for you..
3. Consider a Backdoor Roth IRA or Roth Conversion
Individuals and families with income above certain thresholds are ineligible for direct Roth IRA contributions. That is a shame because Roth retirement accounts offer future tax benefits that traditional IRAs lack. Fortunately, there are financial strategies for getting around this challenge.
Backdoor Roth IRA
The backdoor Roth IRA strategy involves making post-tax contributions to a traditional IRA and then immediately converting those funds to a Roth IRA. This option is best for people who have maximized their employer match within a 401(k) and do not have an existing IRA account (Traditional, SEP, or SIMPLE).
The deadline for completing a Backdoor Roth for a 2025 IRA contribution is April 15, 2026, when your personal tax returns are due. Because of this deadline, some like to simplify the process by converting two years of contributions at the same time (in this example you may consider contributions for both 2025 and 2026).
Roth IRA Conversion
The Roth conversion strategy involves taking pre-tax money from a traditional retirement account and converting it to a Roth account. This strategy is best for people with a traditional account and enough cash to pay taxes on the converted funds.
The deadline for completing a Roth conversion is December 31, 2025.
These strategies can result in tax liabilities. We recommend performing them with the help of a tax professional who can assess your unique situation.
4. Manage and Take Advantage of Your Health Care Savings Plan
If you have a Health Savings Plan (HSA) or a Flexible Spending Account (FSA), you must manage it correctly to maximize the benefits and avoid wasting money. When we perform a paystub review, we ensure you are on track to make all your contributions and correct any mishaps. Below are the essential things to remember about two of the most common healthcare savings accounts.
Flexible Spending Accounts (FSAs)
- Allow you to set aside pre-tax money to pay for qualified medical expenses, reducing your taxable income and medical costs.
- FSA Contribution Limits (2025) = $3,300
- You choose how much you will save each year but cannot adjust the amount later.
- Deadlines – You must contribute and use the funds in the same calendar year, but some plans have a grace period or allow for a limited carryover amount.
Health Savings Accounts (HSAs)
- Reserved for people with high-deductible health plans.
- Allow you to set aside pre-tax money to pay for qualified medical expenses, reducing your taxable income and medical costs.
- Unused contributions roll over from one year to the next.
- Most plans offer investment options. Don’t forget to take advantage of that if you are not spending the money yet.
- If you don’t need the money to cover medical expenses, you can use this account to stash away extra funds to pay for medical care in retirement.
- HSA Contribution Limits (2025) = $4,300 for individuals, $8,550 for families.
- Deadline – All 2025 contributions must occur by April 15, 2026.
5. Strategically Harvest Investment Gains and Losses
Any taxable investments are an opportunity for tax savings. So, as we approach the end of the year, review your brokerage accounts and any company stock from this perspective. Again, it is best to do this with the help of your financial advisor, who will have insight into your circumstances and specific techniques. Below are the basics of what we look for.
Harvesting Capital Gains
The following chart shows the 2025 tax rates for long-term capital gains. As you will see, paying taxes on capital gains is costly for high-income earners but less so if you are in a lower-income bracket. In other words, capital gains can be good or bad, depending on your situation. Take note of your tax bracket before moving on.
A Capital Gains Strategy for High-Income Earners
If you have a taxable brokerage account and are in a higher tax bracket, check if your investments will pay capital gains. Mutual funds, especially, are notoriously costly. That is not necessarily because of the fees, but because they pay taxable distributions most years (usually in November or December), which triggers a tax event.
To illustrate, imagine you have a mutual fund trading at $10/share. In November, you get a distribution of 50 cents. The next day, the value of that fund drops to $9.50. So, instead of a $10 fund, you now have a fund worth $9.50 and 50 cents in cash that you owe 20% taxes on (or 10 cents), even though you didn’t want to realize that gain in the first place.
To make matters worse, most accounts automatically reinvest dividends and capital gains, putting the money right back to work in the fund. In other words, you wind up paying taxes on money you never received without selling anything.
That can be an incredibly inefficient use of your money, especially for households with high incomes.
Also, the amount you owe could be even more, depending on your situation. Therefore, if you have mutual funds in taxable accounts, consider the tax impact of selling them before the distribution period and reinvesting in more tax-efficient investments.
A Capital Gains Strategy for Lower-Income Earners
Lower-income earners (those with taxable income of $96,700 or below for a couple, or $48,350 if you are single) have a different opportunity. You can harvest capital gains and pay zero taxes!
For example, imagine you just got your first real job or are experiencing a down year because you retired or lost your job. If you have been holding onto an investment because you didn’t want to pay the taxes, even though it didn’t fit your plan, this is your chance to do something about it. That investment could be a fund in your brokerage account, company stock, or another appreciated asset. Consider selling it now to take advantage of the tax-free gain and reinvest it elsewhere.
The trick here is to look for situations that will result in taxes so you can identify the right year-end tax strategies to address them.
Harvesting Capital Losses to Offset Gains or Ordinary Income
Of course, the other opportunity here is tax-loss harvesting. That is when you sell stock that has declined in value to offset capital gains from that same year, or $3,000 of ordinary income. And don’t worry if you can’t apply all those losses; you can carry them forward to use in the future for as long as you live. Just be careful not to buy a similar security within 30 days, or you might trigger the wash sale rule, rendering this move ineffective.
6. Take Advantage of the Qualified Charitable Distribution (QCD) or Gift Securities
In 2025, the “One Big Beautiful Bill Act” (OBBBA) took effect, resulting in a much higher standard deduction and fewer opportunities for itemized deductions (like charitable deductions). So, for many people, itemizing no longer makes sense. You can employ a couple of workarounds to offset this tax law’s effect, but you must do so before year-end.
Qualified Charitable Distributions (QCDs)
This strategy applies to people who meet all the following criteria:
- You are subject to Required Minimum Distributions (RMDs) because of a personal or inherited retirement account, and
- You plan to take the standard deduction, and
- You are at least 70 1/2 years old, and
- You wish to donate money to a qualified charity
Distributions from tax-deferred retirement accounts count as ordinary income. That affects your taxes, and sometimes large RMDs result in income-related surcharges on Medicare premiums.
However, if you donate that money straight to a charity, you can prevent these issues. The charity gets the total amount, you get the tax break (by avoiding paying taxes on your RMD), and you can still claim the standard tax deduction. Everyone wins!
Gifting Securities
This option applies to people who meet all these criteria:
- You have appreciated securities that you have held for over a year, and
- You do NOT plan to take the standard deduction, and
- You wish to make a charitable contribution
You can give appreciated securities to a charity and (in most cases) take the deduction at the total market value. In doing so, you avoid the capital gains tax you would have incurred for selling the asset outright, get a deduction, and donate to a good cause.
The Bottom Line
Tax laws are constantly evolving, and we never know how our incomes will change during the year. That can make identifying and implementing the right end-of-year tax strategies challenging.
Fortunately, you don’t have to do it alone. Download our year-end tax planning checklist for a convenient reminder of what must happen and when. Ask our team to review your situation, compare it to your financial plan, and help you adjust. Then, relax and enjoy the holiday season.
Disclosure: The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
