Year-End Tax Planning Opportunities

The fourth quarter is the most consequential period of the year for tax planning. Many of the most powerful strategies — tax-loss harvesting, Roth conversions, charitable giving, and retirement account contributions — have hard December 31 deadlines. Acting with intention in Q4 can meaningfully reduce your tax liability for the year.

Tax-loss harvesting involves selling investments that have declined in value to realize a capital loss, which can offset capital gains elsewhere in your portfolio. If losses exceed gains, up to $3,000 of the excess can offset ordinary income, with the remainder carried forward to future years. The key is to avoid the wash-sale rule, which disallows the loss if you repurchase a substantially identical security within 30 days.

For clients who are in a lower income year — perhaps due to retirement, a career transition, or a business loss — Q4 may be an ideal time to execute a Roth conversion. Converting traditional IRA assets to a Roth while in a lower bracket locks in today's tax rate on those dollars, and all future growth in the Roth account will be tax-free.

Qualified Charitable Distributions (QCDs) are one of the most tax-efficient giving strategies available to those aged 70½ or older. By directing up to $105,000 directly from an IRA to a qualified charity, you satisfy your RMD obligation while excluding the distribution from taxable income entirely. This is superior to taking the distribution and then donating, because the QCD never appears as income.

Donor-Advised Funds (DAFs) offer another powerful charitable strategy. By contributing appreciated securities to a DAF before year-end, you receive an immediate charitable deduction at the full fair market value — avoiding capital gains tax on the appreciation — while retaining the ability to recommend grants to charities over time. This is particularly effective in high-income years.

Finally, review your retirement account contributions. If you have not maximized your IRA or employer plan contributions for the year, Q4 is the time to do so. For those 50 and older, catch-up contributions allow additional savings beyond standard limits. These contributions reduce taxable income today while building tax-advantaged wealth for tomorrow.