The year has been dominated by tariffs, quantum computing and artificial intelligence. However, investors should pay attention to simpler things to add value before December 31st.
Here are strategies to implement now: Fund retirement.
Whether a 401(k), SEP or IRA, all offer opportunities for tax deductible contributions, tax deferralonearningsand creditor protection. Even without an employer match, a 401(k) is worthwhile. If you have a non-employed spouse, you can fund an IRAforthem.Although a Roth IRA doesn’t offer a tax deduction, future earnings and withdrawals are tax-exempt. People aged 60 to 63 are now eligible for “super” catch-up contributions of $11,250.
Roth conversions.
Evaluate converting a Traditional IRA to a Roth. The amount converted will be taxed this year. Once converted, the assets and earnings are tax exempt. It pays to analyze how much can be converted before bumping into higher tax brackets. Additionally, a Roth IRA is not subject to Required Minimum Distributions. The age to begin Required Minimum Distributions has increased to age 73. This offers more time to implement Roth conversions before being forced to take distributions.
Qualified Charitable Donations. Make Charitable Donations from a retirement plan. If aged 73 or older, you have a Required Minimum Distribution on assets heldinaqualifiedretirement plan. A Qualified Charitable Distribution sends money to a qualified charity of your choosing. The charity gets the full amount of the distribution, and you pay no tax. It’s a “win-win” proposition. This is limited to $108,000 per person.
Harvest stock losses.
Review stock sales and harvest tax losses to offset capital gains. Losses reduce taxable income by $3,000 for joint filers while capital losses offset unlimited capital gains. Unused capital losses can be carried forward indefinitely. This turns lemons into lemonade!
Donate Appreciated Stock. Assume you’ve held stock for quite some time with significant appreciation. If you sell that stock to fund charity, you must first pay taxes upon liquidation. However, donating the stock directly to charity delivers the full benefit of the donation and you avoid paying capital gainstax.Furthermore, you can still qualify for a charitable deduction if itemizing. This is superior versus donating cash.
Cash Donations: In 2025, taxpayers who don’t itemize deductions can claim an above-the-line deduction for cash donations for qualifying charities. This means even those taking the standard deduction can benefit from charitable contributions. The deduction is capped at $1,000 for single filers and $2,000 for joint filers. This deduction reduces the taxpayer’s Adjusted Gross Income (AGI) before applying other deductions and credits. For taxpayers who itemize, the charitable contribution is reduced by 0.5% of their AGI. This means only the portion of charitable contributions exceeding this threshold are deductible.
Bunch itemized deductions. The individual standard deduction is $15,750 or $31,500 for joint filers. Make more donations in years you itemize, and fewer in years you take the standard deduction.
AdditionalSeniorDeduction. Taxpayers aged 65 or older or blind are eligible for an additional $2,000 standard deduction ($4,000 for joint filers.) Additionally, a $6,000 temporary bonus deduction for those 65 and older canbeaddedtothestandard deduction. Bonus deductions phase out for incomes of $75,000 for single filers and $150,000 for joint filers. These can make Roth conversions more efficient.
Push or Pull Expenses.
Some expenses can be pushed into the next year or pulled into this year. This is important if you itemize deductions. Expenses that can be pushed or pulled might be estimated property taxes due next year, estimated state income taxes due next year,mortgageinterest, medical bills or charitable donations.
Medical Expense Deductions. Medical expenses are limited to 7.5% of Adjusted Gross Income.
State & Local Taxes (SALT). Itemized amounts for property and state income taxes or sales taxes are a combined $40,000. Depending upon the value of property, the sales tax deduction may be more valuable for Texas residents since we don’t have an income tax.
Bonus Depreciation.
Bonus depreciation of 100% enables companies to write off the cost of most depreciable business assets put in service after January 19, 2025. Machinery, equipment, computers, appliances and furniture usually qualify for the tax break.
Even though tax deductions may not add points to your rate of return, theyaddeconomic value to your finances. Act now to take advantage before 2026!
Dave Sather is a Certified Financial Planner ™ and the CEO of the Sather Financial Group, a fee-only investment management and strategic planning firm.
