It always seems like the end of the year sneaks up on us so fast; however, it makes for the perfect time to take a look at your tax situation. We get it! Taxes are not the most exciting topic, but a few smart moves now, can make a huge difference in how much you keep in your pocket later and how strong your finances look heading into the future.
Here are a few ideas worth thinking about before the end of the year:
1. Consider a Roth Conversion as a part of your long-term plan
Converting some of your traditional IRA assets into a Roth IRA can be a smart long-term move. While you’ll pay taxes on the amount converted today, your money can grow tax-free moving forward, and you won’t have to worry about required minimum distributions (RMDs) in retirement. It’s definitely worth exploring if you expect your tax rate to increase or you want more flexibility later in life.
2. Use tax-loss harvesting strategically
If some of your investments didn’t perform as well this year, consider realizing some of those losses to offset gains elsewhere in your portfolio. This strategy, called tax-loss harvesting, can help reduce your taxable income and improve the overall efficiency of your investment plan. It is a practical way to make the most of some lesser performing investments.
3. Plan for state specific taxes
Planning a move or spending more time in another state? Don’t overlook how different state tax laws might impact you. Things like state and local tax (SALT) deduction limits can really change your bottom line, so it is better to know now than get surprised later.
4. Reevaluate your business structure
For business owners, year-end is a great time to review how income flows through your company. The way your income is categorized, whether as pass-through income, dividends, or capital gains, can significantly affect your tax liability. It may also be worth confirming that your current business entity type still aligns with your long-term goals and growth strategy.
5. Play around with timing your income and deductions
If you expect to be in a different tax bracket next year, you could be able to save some taxes just by shifting when you tax certain deductions or income. Paying a deductible expense now or pushing a bonus into next year could be some little tweaks that can really add up.
6. Keep an eye on upcoming tax law changes
There are some potential tax updates coming after 2026, so don’t wait until the last minute. Check in with your CPA or financial advisor to make sure your plan is ready for whatever changes come your way.
Year-end is the perfect time to make sure your financial plan is up to date and operating as intended. Don’t have a plan? Give us a call, and we will walk through your options to tailor a plan that fits your unique needs and goals. Let’s review your strategy to figure out which of these moves makes most sense for you.