As we approach the end of the year, there’s still time to make smart tax decisions. With tax season just around the corner, focusing on these strategies can boost your refund or lower the taxes you owe.
Most important moves should be completed by December 31. However, contributions to individual retirement accounts (IRAs) or health savings accounts (HSAs) can still be made up until the tax deadline next year. Keep in mind that with the holidays nearing, trading days will be shortened, so plan accordingly.
Potential Bigger Refunds Ahead
Many taxpayers might see higher refunds in 2026 due to the tax changes made during Donald Trump’s presidency. Experts say that because the IRS didn’t update the withholding tables after those changes, many workers could benefit when they file their taxes.
Smart Strategies Before Year-End
Here are some effective tactics to consider:
Tax Loss Harvesting: This involves selling investments that have lost value to offset gains from other investments. If your losses surpass your profits, you can deduct up to $3,000 from your regular income. However, with the stock market up nearly 17% this year, many may not have losses to harvest.
Tax-Gain Harvesting: If you’re in a lower tax bracket, you might want to sell some profitable assets. This strategy can help you diversify your portfolio while avoiding capital gains taxes, especially if your income falls under the 0% capital gains bracket.
Michael DeMassa, a certified financial planner, emphasizes that even on New Year’s Eve, as long as the trades are made by the last trading day of the year, they count for that year.
Year-End Roth Conversions
Another popular strategy is converting traditional IRA funds into a Roth IRA. This allows for tax-free growth in the future. However, be mindful of the upfront taxes that will be due upon conversion. Many experts suggest waiting until year-end for these conversions to have a clearer picture of your income for the year.
According to Judy Brown, a financial advisor, the process can be quick if you already have a Roth IRA set up. Transferring appreciated assets directly can expedite your conversion. On the other hand, starting a new Roth IRA now could slow you down due to setup times.
Recent Trends and Expert Insights
The IRS recently reported that a significant number of taxpayers are either unaware of these strategies or don’t utilize them effectively. A recent survey showed that only about 30% of taxpayers took advantage of year-end strategies last December. This indicates that many are missing out on potential savings.
As you think about your tax situation, consider looking into these strategies. Doing so can help you make the most of your investments and prepare for the upcoming tax season.
For further insights, read more from the IRS on tax planning.
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