Tax Moves to Make Before the New Year
As the year winds down, it’s a great moment to review any remaining opportunities to maximize deductions, claim eligible tax credits, and maximize retirement contributions before heading into a new tax year. Here are a few year-end tax planning tips to consider.
Contribute to Retirement Accounts
For the 2025 tax year, contribution limits for IRAs and 401(k)s have increased. Take a moment to confirm you’ve contributed as much as you intended to your 401(k) and individual retirement accounts. Contributions to traditional IRAs and 401(k) plans may reduce your taxable income for the year you make them.
Consider Your Roth Options
Roth IRAs and Roth 401(k)s are funded with after-tax dollars, so contributions aren’t deductible. However, these accounts offer tax-free withdrawals in retirement, which can help lower future tax liabilities and provide long-term savings advantages.
Offset Your Capital Gains
If you sold investments at a loss this year, you may be able to use those losses to offset capital gains. You can offset all of your gains and apply up to $3,000 of additional losses to reduce your taxable income. Any remaining losses can be carried forward for use in future years.
Review Itemized Deductions
Many taxpayers opt for the standard deduction, but itemizing may benefit you if your allowable deductions exceed that amount. Consider potential deductions like mortgage interest, state and local taxes, and property taxes.
Take Your Required Minimum Distributions
Starting at age 73, you’re required to take minimum distributions (RMDs) from tax-deferred retirement accounts each year. Missing the deadline can result in a 50% excise tax on the amount you should have withdrawn, so make sure to take your RMDs before year-end.
Even though your 2025 tax return isn’t due until April 2026, taking these steps before year-end can set you up for a smoother, more efficient tax season. If you have questions about your taxes or deductions, JTS Associates CPAs is here to help. Contact us at 516-877-5900.
