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) can be a tax-efficient charitable giving strategy for individuals age 70½ or older. When eligible IRA assets are transferred directly to a qualified charity, the QCD may count toward satisfying all or a portion of the individual's required minimum distribution (RMD) and can be excluded from taxable income. In some cases, this may provide greater tax benefits than taking a taxable IRA distribution and then making a charitable contribution. Tax outcomes vary based on an individual's circumstances; investors should consult their tax advisor.

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 may be 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.