Tax-loss harvesting to manage capital gains
If you hold investments with paper losses, consider harvesting losses to offset realized gains.
This is particularly useful after market volatility: selling underperforming positions can offset taxable gains from winners.
Be mindful of wash-sale rules that disallow a loss deduction if you buy a substantially identical security within a short window. A disciplined process—reviewing portfolios quarterly—helps capture opportunities without disrupting long-term strategy.
Convert and diversify retirement tax exposure
Roth conversions can be a powerful tool to shift tax exposure from the future to the present.
Partial conversions allow you to manage tax brackets and avoid a large spike in taxable income. For those whose income limits prevented direct Roth contributions, a strategic “backdoor” approach can still create Roth holdings. Weigh the tradeoffs: converting now may increase taxes today but can reduce required distributions and tax drag later.
Maximize tax-advantaged accounts
Contributions to employer-sponsored retirement plans, traditional IRAs, and health savings accounts (HSAs) grow tax-advantaged. HSAs offer one of the most flexible tax trifectas—pre-tax contributions, tax-free growth, and tax-free qualified withdrawals for medical expenses. Prioritize these accounts where appropriate to lower taxable income and build tax-preferred savings.
Bunch itemized deductions and use donor-advised funds
If you’re near the standard deduction threshold, bunching deductible expenses into one year can allow itemizing in that year while taking the standard deduction in the next. Charitable giving through a donor-advised fund (DAF) enables a large up-front deduction while distributing donations to charities over time—useful for bunching strategies and estate planning.
Qualified charitable distributions and direct gifts
If eligible, directing distributions from retirement accounts to qualified charities avoids counting that withdrawal as taxable income. For highly appreciated assets, gifting shares directly to charity avoids capital gains that would arise from selling the shares and donating cash.
Optimize business structure and owner compensation
Small-business owners should periodically review entity structure and compensation patterns. Choosing the right entity and balancing salary versus distributions can reduce self-employment taxes and increase retirement plan contributions. Take advantage of available business deductions and depreciation strategies—just be sure to document business purpose and maintain strong records.
Mind timing of income and deductions
Shifting income or deductible expenses across tax years can materially affect tax liability if you’re close to tax-bracket thresholds.
For example, deferring year-end bonuses or accelerating deductible expenses can provide benefits.
Coordinate with payroll, retirement plan administrators, and financial advisors to implement timing strategies properly.
Avoid common pitfalls
– Overlooking wash-sale and related-party rules when harvesting losses
– Letting required minimum distributions surprise you—plan for them
– Ignoring state tax implications when moving or converting accounts
– Making investment decisions based solely on tax outcomes rather than overall goals
A good tax strategy is year-round, coordinated with financial planning and life goals. Start by reviewing your portfolio, retirement accounts, and charitable plans; run “what-if” scenarios with a tax professional to see how moves will affect both taxes and long-term objectives. Small, timely actions often compound into meaningful savings and greater flexibility over time.