As 2025 winds down, the window to make smart, tax-efficient financial decisions is quickly closing. For many individuals — especially high earners, retirees, and business owners — the final weeks of the year are a prime opportunity to align your financial strategies with evolving tax laws, market conditions, and long-term goals.
At IM Wealth Partners, we believe effective tax planning isn’t just about minimizing this year’s tax bill; it’s about managing your tax exposure over a lifetime. Here are some actionable strategies to consider before December 31.
1. Review Your 2025 Income and Tax Bracket
Start by understanding where your taxable income will land for the year. This determines how much room you may have to execute other tax strategies, such as Roth conversions or capital gains harvesting, while staying within your current tax bracket.
Why it matters in 2025:
- Tax brackets remain favorable under the current tax code, but are scheduled to increase in 2026 if the Tax Cuts and Jobs Act (TCJA) sunsets.
- A lower-income year may offer a unique chance to recognize income or complete a Roth conversion at a reduced tax cost.
Planning Tip: Coordinate income timing with your CPA and advisor; deferring or accelerating income can create room for additional strategies.
2. Consider a Roth Conversion While Rates Are Still Low
Roth IRA conversions can be a powerful long-term tax planning tool, particularly in years when your taxable income is below normal levels.
Benefits include:
- Future withdrawals are tax-free (if qualified).
- No required minimum distributions (RMDs).
- Strategic conversions can “fill up” your current tax bracket.
Why now: With income tax rates scheduled to rise in 2026, converting in 2025 could lock in lower tax rates before they disappear.
3. Harvest Tax Losses (and Gains) in Your Investment Accounts
If you own taxable investment accounts, now is the time to consider tax-loss harvesting, the practice of selling investments that have declined in value to offset realized capital gains.
Strategic moves include:
- Selling losing positions to offset gains elsewhere in your portfolio.
- “Banking” losses to offset future gains (up to $3,000/year against ordinary income).
- Realizing gains if you’re in a low capital gains tax bracket.
Avoid the Wash-Sale Rule: You can’t repurchase the same or “substantially identical” security within 30 days, or the loss is disallowed.
4. Maximize Charitable Giving — Especially With Appreciated Assets
For charitably inclined clients, the year-end is an ideal time to give with both purpose and tax efficiency.
Innovative giving strategies include:
- Donating appreciated securities you’ve held for more than one year. This allows you to avoid capital gains tax on the appreciation and claim a charitable deduction for the fair market value (subject to AGI and deduction limits).
- Using a donor-advised fund (DAF) to “bunch” charitable contributions: by contributing to the DAF in the current tax year, you claim the deduction now while retaining flexibility to recommend grants to charities later.
- Qualified Charitable Distributions (QCDs): For clients age 70½ or older, a direct transfer from an IRA to a qualified public charity (not a DAF) of up to the $108,000 annual limit (indexed for inflation) can be excluded from gross income and may count toward your RMD.
Timing matters — to count for the current tax year, charitable contributions (including DAF funding, appreciated asset transfers, or QCDs) must be completed by December 31.
5. Use Your Annual Gift Tax Exclusion
Each individual can gift up to $19,000 per recipient in 2025 without using any of their lifetime estate and gift tax exemption. This exclusion applies to as many recipients as you’d like — family members, friends, or others.
Why now:
- This annual exclusion resets each year and must be used before December 31.
- Gifts under the annual limit do not require filing a gift tax return and do not count against your lifetime exemption.
- It’s an efficient way to gradually reduce a taxable estate, especially for affluent families pursuing multi-generational planning.
Married couples can combine their exclusions through gift-splitting, allowing them to give up to $38,000 per recipient in 2025.
Planning Tip: Gifts above the annual exclusion must be reported on IRS Form 709 — even if no tax is owed.
6. Plan Around the 2026 Tax Sunset
Many of the individual tax provisions introduced under the Tax Cuts and Jobs Act (TCJA) of 2017 are set to expire after December 31, 2025, unless extended or modified by Congress. If these provisions sunset as scheduled, several significant tax changes could take effect in 2026.
What may change:
- Income tax brackets may rise, returning to pre-2018 levels.
- The federal estate and gift tax exemption, currently $13.61 million per individual, may be reduced to approximately $6.8–$7 million per individual.
- The standard deduction may decrease, and certain deductions and credits (such as the SALT deduction cap and the expanded Child Tax Credit) could revert to prior limitations.
Important Note: These changes will only occur if Congress does not pass new legislation before the end of 2025. Current law mandates these reversion dates unless extended.
Actions to consider in 2025:
- Accelerate income (e.g., bonuses, capital gains) if you expect to be in a higher tax bracket in 2026.
- Complete Roth IRA conversions while tax rates remain low.
- Make large lifetime gifts using the current estate and gift tax exemption before it potentially contracts.
- If you’re planning an estate or business transition, completing it under current rules could be advantageous, depending on your situation.
As always, coordinate with your financial planner, CPA, and estate attorney to assess your best course of action.
7. Confirm RMDs and Retirement Contributions
If you’re age 73 or older, you must take Required Minimum Distributions (RMDs) from IRAs and employer retirement plans by December 31 — unless this is your first RMD year.
Additional year-end retirement reminders:
- Consider maximizing contributions to 401(k), IRA, and HSA accounts before year-end
- Business owners can make contributions to SEP IRAs or Solo 401(k)s, potentially through the tax-filing deadline.
- Consider backdoor Roth strategies if eligible and advantageous.
Missed RMDs can result in a 25% penalty, but that may be reduced to 10% if corrected promptly.
Planning Starts Now
Waiting until you file your taxes in April 2026 is often too late to make the most meaningful changes. By acting now, before December 31, you retain more control, flexibility, and long-term tax advantages.
At IM Wealth Partners, we take a comprehensive, proactive approach to year-end planning — helping you coordinate tax strategies with your retirement income, investments, estate plans, and charitable goals.
Schedule a Year-End Planning Review
Whether it’s optimizing taxes, fine-tuning your portfolio, or preparing for the 2026 tax landscape, our team is here to guide you.
Contact IM Wealth Partners to schedule a complimentary consultation and determine whether your current strategy aligns with your long-term goals.