We’re in early December, which suggests you’ve got a number of weeks left to make significant changes to your 2025 tax scenario. That is the right time to estimate your taxable earnings for the yr and see the place you land within the tax brackets. Just a little planning now can prevent 1000’s in April.
In the event you’re not weaving tax planning into your total retirement and funding technique, you’re more than likely leaving cash on the desk. And I’m not speaking concerning the returns that present up in your 401(ok) assertion. Having a 401(ok) or IRA doesn’t imply you’ve got a retirement plan. A correct monetary plan is multifaceted—it incorporates funding technique, tax optimization, property planning, and danger administration. In the event you assume monetary planning is nearly selecting between a handful of shares or an index fund, you’re lacking the larger image.
With that in thoughts, listed below are 5 year-end tax planning areas to concentrate on. These are the low-hanging fruit—the alternatives that present up in my consumer base yr after yr. This isn’t an exhaustive listing, and never all the pieces will apply to your scenario, however chances are high at the least a number of of those will likely be price exploring. As all the time, seek the advice of your tax planning professionals earlier than implementing any of those methods. This define is for academic functions solely.
1. Tax-Loss Harvesting
Tax-loss harvesting entails promoting investments at a loss inside your brokerage account to offset realized positive aspects elsewhere in your portfolio. This will decrease your total capital positive aspects tax invoice. No person invests hoping for losses, however they’re inevitable. Historic evaluation exhibits us that markets rise about 70% of the time, however the common intra-year drop is round 14% in keeping with JP Morgan’s Information to the Markets analysis. Making the most of these dips can create tax advantages.
However simply since you promote, it doesn’t imply you’re making an attempt to take a seat out of the market. You promote the shedding place and instantly purchase one thing related however considerably completely different to keep up your market publicity. Simply be careful for the wash sale rule: in abstract, for those who purchase the identical or a considerably similar safety inside 30 days earlier than or after the sale, the IRS gained’t let you declare the loss.
Any losses you don’t use this yr could be carried ahead indefinitely, and you’ll deduct as much as $3,000 yearly towards unusual earnings.
2. Tax-Achieve Harvesting
Tax-loss harvesting will get all the eye, however tax-gain harvesting deserves extra. Typically it is sensible to deliberately notice positive aspects or pull earnings into the present yr. Why would anybody need to improve their taxable earnings? Let me present you with an instance:
For long-term capital positive aspects, a pair submitting collectively in 2025 can have as much as $96,700 in taxable earnings and pay 0% in capital positive aspects tax. Bear in mind, taxable earnings is what’s left after deductions. For a pair each age 65 in 2025, the deduction math seems like this:
- Commonplace deduction: $31,500
- Age 65+ further deduction: $3,200 ($1,600 per)
- New senior bonus deduction: $12,000 ($6,000 per, topic to earnings limitations)
- Whole deductions: $46,700
This implies a pair might have adjusted gross earnings of $143,400 and nonetheless be within the 0% capital positive aspects bracket. That’s over $10,000 per 30 days in spending—fairly affordable for a lot of {couples} in retirement.
Let’s say you add up all of your earnings and also you’re solely at $110,000. Does it make sense to comprehend some capital positive aspects? It’s at the least one thing to discover. You’ll improve taxable earnings, but when completed accurately, you gained’t pay a dime in further capital positive aspects tax. This technique works notably effectively within the early years of retirement for those who’re delaying Social Safety or IRA distributions and spending from after-tax brokerage accounts.
And identical to tax-loss harvesting, the objective is to not promote your positions and sit out of the market. Bear in mind the wash sale rule talked about above solely applies to losses. In the event you like an funding that’s appreciated, you possibly can promote it, notice the achieve tax-free, and instantly purchase it again with out lacking out on future development.
3. Earnings and Expense Timing
You’ll be able to’t all the time management when earnings arrives or bills hit, however when you possibly can, timing issues.
For instance, the One Massive Stunning Invoice handed earlier in 2025 elevated the state and native tax (SALT) deduction restrict to $40,000 (up from $10,000) for 2025, subject to income limits. In the event you’re in a high-tax state and also you haven’t maximized this profit for the present yr, you would possibly contemplate prepaying your 2026 first-quarter taxes in case your jurisdiction permits it. This lowers your 2025 taxable earnings and allows you to maximize the deduction once more in 2026. This profit solely runs by way of 2028, so use it whilst you can. You’ll have to itemize to say this, however with the OBBB adjustments, it’s price working the numbers even for those who sometimes take the usual deduction.
On the earnings aspect, that new senior bonus deduction would possibly make it worthwhile to drag some earnings into 2025 to take full benefit of your obtainable deductions. Or contemplate a Roth conversion to replenish decrease tax brackets in low-income years. A Roth conversion entails shifting cash from a standard IRA to a Roth IRA, paying taxes now at at present’s charges, and having fun with tax-free development and withdrawals later.
4. Charitable Giving Methods
In the event you’re charitably inclined, Certified Charitable Distributions (QCDs) are highly effective. When you’re 70½, you possibly can donate straight out of your IRA to charity. The distribution doesn’t rely as taxable earnings, and it satisfies your required minimal distribution for those who’re over 73.
One other charitable giving technique entails donating appreciated investments out of your brokerage account on to a Donor Advised Fund. The charity will get the complete worth, you keep away from capital positive aspects tax on the appreciation, and also you improve the fee foundation in your brokerage account. Two birds, one stone.
Yet one more merchandise to know—beginning in 2026, there’s a brand new 0.5% AGI flooring and a 35% cap for top-bracket donors. For instance, in case you have $400,000 in earnings, you’d solely be capable of deduct quantities given over $2,000. And for those who’re within the highest tax bracket, your deduction is capped at 35 cents per greenback donated. Money-gift deductions proceed to be capped at 60% of AGI; that restrict has not modified.
This creates a possibility to speed up giving in 2025 earlier than these restrictions kick in.
5. Retirement Plan Contributions
The fundamentals nonetheless matter. Maximize your 401(ok) worker deferrals earlier than December thirty first. Health Savings Accounts and 529 training funds are additionally nice year-end strikes. Whereas 529 contributions don’t present a federal tax deduction, most states provide a state earnings tax profit—examine your particular state guidelines.
One exception to the December thirty first deadline: in case you have an Particular person 401(ok) and it’s the plan’s first yr, you’ve got till the tax submitting deadline to ascertain and fund it for the prior yr. This may be helpful if you end up with additional money after the brand new yr.
Planning forward makes all of the distinction. These methods gained’t all apply to everybody, however most legal professionals approaching or in retirement will profit from at the least a number of of them. In the event you discovered this useful and need extra retirement and tax planning insights, observe together with Money Meets Law, my weekly publication the place I dig into these matters in additional element. I’ll be highlighting a number of of them over the following few weeks.
DISCLOSURE: The data on this article will not be supposed as tax, accounting, retirement or authorized recommendation, as a proposal or solicitation of a proposal to purchase or promote, or as an endorsement of any firm, safety, fund, or different securities or non-securities providing. This info shouldn’t be relied upon as the only real think about an funding making choice or your choice to retire. In any examples or case research used, all consumer names have been modified.
David Hunter, CFP® is a CERTIFIED FINANCIAL PLANNER™ and proprietor of First Light Wealth, LLC, a monetary planning & wealth administration agency with a singular concentrate on serving attorneys nationwide. David has over a decade of expertise serving to shoppers construct monetary plans and has been featured in publications corresponding to Legal professional at Work, ThinkAdvisor, MarketWatch, Monetary Planning, and InvestmentNews. David additionally writes weekly to attorneys in his widespread Money Meets Law publication. For extra about David, go to firstlightwealth.com/lawyers or join with him on LinkedIn.
