Why Year-End Is a Powerful Tax Planning Moment
As the holidays approach, year-end is often viewed as a time to pause, reflect, and reset. But for your financial plan, it’s also a strategic opportunity.
Taxes don’t just happen in April—they’re shaped by what you do now. From charitable gifts to Roth conversions, the decisions you make in December can create ripple effects well into next year and beyond.
Here are six questions to ask before the calendar flips.
1. Have You Satisfied Your Required Minimum Distributions (RMDs)?
If you’re 73 or older (or have inherited an IRA), you’re required to withdraw a minimum amount from qualified retirement accounts by year-end. Missing the deadline could result in steep penalties—up to 25% of the shortfall.
✅ Action Step: Confirm that all necessary distributions have been taken from your IRAs and 401(k)s. RMD rules changed recently, so this is an area to double-check with your advisor.
2. Should You Consider a Roth Conversion?
A Roth conversion allows you to move assets from a traditional IRA to a Roth IRA—paying taxes now in exchange for tax-free growth potential and withdrawals later.
It can make sense if:
- Your tax rate is lower this year than it will be in the future
- You don’t need the IRA funds immediately
- You’re planning for long-term estate or legacy goals
✅ Action Step: Run a “tax-bracket analysis” to determine how much (if any) you could convert without pushing into a higher bracket.
3. Are You Making the Most of Charitable Giving Opportunities?
Charitable gifts can support the causes you care about and reduce your taxable income. Options include:
- Donating appreciated securities (avoids capital gains)
- Bunching gifts into a single year for itemization by contributing to a Donor-Advised Fund (DAF)
- Gifting part of your Required Minimum Distribution (RMD) via Qualified Charitable Distribution (QCD) which means you avoid paying income tax on these funds
✅ Action Step: Identify causes you want to support, and consider whether a DAF or gifting strategy aligns with your broader plan.
Note: All charitable donations must be completed by December 31 to count toward your 2025 return.
Do You Know Where You’ll Land Come Tax Season?
Many families don’t have a clear picture of their 2025 tax exposure until April—when it’s too late to adjust.
Now is the time to project:
- Total income (including capital gains, K-1s, bonuses)
- Potential deductions or phaseouts
- Impact of any major life changes (sale of a home, inheritance, business income)
✅ Action Step: Ask your tax professional or advisor to run a tax projection. Knowing now gives you more room to act.
5. Are There Tax Loss Harvesting Opportunities in Your Portfolio?
If you sold investments at a loss this year, you may be able to use those losses to offset capital gains—or reduce your taxable income (up to $3,000 for married couples filing jointly).
✅ Action Step: Review your non-retirement investment accounts for potential loss harvesting opportunities. Be mindful of the wash sale rule (you can’t buy back the same or substantially identical security within 30 days).
6. Have You Used the Annual Gift Exclusion?
You can give up to $19,000 per person (or $38,000 per couple) tax-free each year without using any of your lifetime estate exemption.
This is a powerful tool for:
- Reducing your taxable estate
- Supporting children or grandchildren directly
- Transferring wealth intentionally, while you’re here to witness the impact
✅ Action Step: Consider gifting cash, appreciated securities, or funding 529 plans as part of your family gifting strategy.
You Don’t Need to Make Every Move—But You Do Need a Plan
Not every strategy fits every family. But by reviewing the possibilities before December 31, you give yourself the gift of control.
At Gatewood, we help clients turn complexity into clarity—designing tax-aligned strategies that work today and into the future.
Important Disclosures
This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.
A Roth IRA conversion—sometimes called a backdoor Roth strategy—is a way to contribute to a Roth IRA when income exceeds standard limits. The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you’re required to take a minimum distribution in the year of conversion, it must be completed before converting.
To qualify for tax-free withdrawals, you must generally be age 59½ and hold the converted funds in the Roth IRA for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions.
