Year-End Tax Tips: Smart Moves Before December 31st
As the year wraps up, it’s a good time to pause, take stock, and make sure your money is working as hard as it can. A little planning before December 31st can reduce your tax bill and set you up for success in the new year. Here are a few ideas to consider as you close out 2024.
- Put Market Losses to Work
Not every investment goes up, but even losses can be useful. With a strategy called tax-loss harvesting, you can sell investments that are down and use those losses to offset gains elsewhere in your portfolio. This can lower your taxable income and reduce the taxes you owe.
- Good to know: The IRS doesn’t allow you to sell something at a loss and then immediately buy it back—there’s a 30-day waiting period called the “wash sale” rule. But you can buy something similar to stay invested.
- Give Smarter, Not Just More
The holidays are a season of giving, and that can also mean giving smartly when it comes to taxes.
- Donate appreciated investments: Instead of writing a check, donating stock that’s grown in value lets you give more to the cause and skip the capital gains tax.
- QCDs from IRAs: If you’re over 70½, you can send money directly from your IRA to a charity. This counts toward your required minimum distribution (RMD) but doesn’t show up as taxable income—a win-win.
- Bunching gifts: If you don’t normally itemize deductions, you can “bunch” several years’ worth of donations into one year, often using a donor-advised fund, to get the full tax benefit.
- Changes Coming in 2026
Big shifts are scheduled to take effect starting in 2026 under the new tax law. Planning now will help you take advantage of opportunities before rules change:
Estate and Gift Taxes
- Higher exemptions for now: Each person can currently pass on over $13 million tax-free, but in 2026 the exemption will reset to $15 million per person (indexed for inflation). Families with significant wealth should still review trusts and gifting strategies while the rules are favorable.
SALT Deduction Relief
- For years, the state and local tax (SALT) deduction was capped at $10,000. Starting in 2026, the cap will increase to $40,000 for several years (through 2029).
- This can provide meaningful relief to families in high-tax states. But note: for very high-income households, the benefit phases out.
Charitable Deduction Rules
- 60% AGI limit stays permanent: Cash gifts to public charities can be deducted up to 60% of adjusted gross income.
- Non-itemizers get a boost: A version of the charitable deduction for taxpayers who don’t itemize is expected to return in 2026, making smaller gifts more broadly deductible.
- New “floor” for itemizers: Beginning in 2026, you’ll need to give more than $1,000 (single) or $2,000 (married filing jointly), or 0.5% of AGI (whichever is greater), before itemized charitable deductions start to count. This means smaller gifts may not reduce taxes unless they exceed that floor.
- Planning opportunity: If you’re considering a major gift, aligning it with these new rules may maximize your tax benefit.
- Don’t Forget the Basics
Along with these bigger strategies, year-end is also a great time to:
- Max out your retirement accounts (401(k), IRA, HSA).
- Double-check your tax withholdings and estimated payments.
- Look at whether a Roth conversion makes sense while rates are still relatively low.
Wrapping It Up
Year-end planning doesn’t need to be overwhelming—it’s about taking a few smart steps today that can make a big difference tomorrow. From putting losses to work, to giving to causes you care about, to preparing for upcoming tax law changes, the right moves now can keep more money in your pocket and align your finances with your long-term goals.
Want help reviewing your year-end strategy? Our team at T.M. Wealth Management is here to guide you through these opportunities and make sure you start the new year confident and prepared.