Five tax moves to make before December 31
A few hours of planning in the fourth quarter can save thousands. Here are the five moves we review with every client before year end.
Ardent Editorial Team
Most tax planning happens too late, in April, when the year is already over. These five moves only work if you make them before December 31.
1. Harvest your losses
Selling investments that are down lets you offset gains elsewhere and up to $3,000 of ordinary income. Reinvest in something similar (but not identical) so you stay invested.
2. Max out tax-advantaged accounts
Check your 401(k), HSA and, if eligible, backdoor Roth contributions. Workplace plan contributions generally have to come from paychecks made before year end.
3. Consider a Roth conversion
If this year’s income is lower than usual, converting part of a traditional IRA to a Roth can lock in a lower tax rate on money that will then grow tax-free.
4. Bunch your charitable giving
With a higher standard deduction, many families get no tax benefit from giving. Grouping two or three years of donations into one, often through a donor-advised fund, can change that.
5. Take required distributions
If you’re 73 or older, make sure required minimum distributions are out of the account by year end. Missing one can cost a 25% penalty.
This article is general education, not personal advice. Talk to a qualified advisor about your situation.