Masters in Business

Year-End Tax Planning Moves

December 11, 2025

Key Takeaways Copied to clipboard!

  • Tax planning is an integral, generational component of any financial plan, as taxes are often the largest annual expense for investors. 
  • Investors should prioritize proactive tax deferral strategies over simple tax avoidance, recognizing that deferred tax bills will eventually come due. 
  • Key year-end tax moves for high-earning professionals include strategic charitable giving (potentially using bunching strategies with appreciated securities), optimizing equity compensation recognition to manage tax brackets and AMT, and maximizing contributions to tax-advantaged retirement accounts like 401(k)s and HSAs. 

Segments

Tax Planning Importance Overview
Copied to clipboard!
(00:03:48)
  • Key Takeaway: Tax advice is inseparable from financial advice because taxes constitute the largest expense in most investors’ annual budgets.
  • Summary: Taxes are often the largest expense in an investor’s annual budget, surpassing even mortgage costs. Estate planning is fundamentally driven by tax considerations, as its necessity diminishes without estate tax. Clients often prioritize saving $1,000 in taxes over achieving six-figure trading gains, highlighting the interconnectedness of tax and wealth strategy.
Tax Deferral Misunderstandings
Copied to clipboard!
(00:05:19)
  • Key Takeaway: Many common tax strategies, like accelerated depreciation or opportunity zones, only defer taxes, meaning the bill will eventually be due.
  • Summary: A common misunderstanding is confusing tax deferral with tax avoidance, as mechanisms like 401(k) contributions or accelerated depreciation eventually lead to recognized income or recapture. The time value of money makes current deductions valuable, but investors must plan for the future tax hit. Mismanaging capital gain timing, such as failing to push gains into the next year for loss harvesting opportunities, is another frequent error.
Top Moves for High Earners
Copied to clipboard!
(00:07:00)
  • Key Takeaway: Top tax moves for high-earning professionals involve optimizing charitable giving, managing equity compensation income recognition, and maximizing small business deductions like QBI.
  • Summary: Charitable giving is an accessible lever, but givers must ensure they itemize deductions, making bunching strategies or Donor Advised Funds useful. Equity compensation requires careful timing to maximize income before hitting the next federal/state bracket or triggering AMT from incentive stock options. Small business owners must monitor wage levels to avoid limitations on the Qualified Business Income (QBI) deduction.
Tax-Advantaged Account Limits
Copied to clipboard!
(00:09:13)
  • Key Takeaway: The Mega Backdoor Roth option allows W-2 employees to create a tax-free bucket within their 401(k) if their plan permits after-tax contributions and conversions.
  • Summary: The 401(k) limit is $70,000 this year, and employees should investigate the Mega Backdoor Roth option for after-tax contributions converted to Roth. Deductible IRA contributions may be limited if the client has an employer plan, but a backdoor Roth conversion is possible if no pre-tax money exists in any IRA. HSAs offer triple tax advantages (deductible contributions, tax-free growth, tax-free withdrawals for healthcare) and function as an excellent long-term retirement vehicle.
2026 Catch-Up Contribution Change
Copied to clipboard!
(00:11:36)
  • Key Takeaway: Starting in 2026, all catch-up contributions for individuals over age 50 will be required to be Roth contributions, regardless of the taxpayer’s preference.
  • Summary: The $7,500 catch-up contribution for those over 50 will mandate Roth treatment beginning in 2026, shifting away from the historically preferred pre-tax option for high earners. This forced Roth contribution increases future flexibility by creating tax-free buckets to draw from in retirement. Nobody regrets a Roth contribution, as paying the tax upfront removes future uncertainty.
Thoughtful Tax Loss Harvesting
Copied to clipboard!
(00:12:29)
  • Key Takeaway: Tax loss harvesting should be an ongoing, regular activity throughout the year, not just a year-end review, to maintain portfolio fidelity while realizing losses.
  • Summary: Thoughtful harvesting implies continuous activity, utilizing direct indexing or manual review to book losses when stocks are underwater, rather than waiting for December. Selling losers and immediately reinvesting in a similar company maintains portfolio exposure without triggering wash sale rules. New Jersey is an exception, as it does not allow loss carryforwards, requiring a tactical ‘gains harvest’ in December to offset losses realized earlier in the year at the state level.
Charitable Bunching Strategy
Copied to clipboard!
(00:14:27)
  • Key Takeaway: Bunching multiple years’ worth of charitable gifts into a single high-income year, often using appreciated stock gifted to a Donor Advised Fund, maximizes itemized deductions.
  • Summary: Clients should assess if they clear the itemized deduction hurdle before their charitable gifts provide a federal tax benefit. Bunching three to ten years of giving into one year, such as 2025, allows the deduction to be taken when itemizing is most advantageous. Gifting appreciated securities directly to a Donor Advised Fund allows the client to claim the deduction while retaining the ability to grant funds over subsequent years.
SALT Deduction Changes
Copied to clipboard!
(00:15:42)
  • Key Takeaway: The State and Local Tax (SALT) deduction limit increased from $10,000 to $40,000 under the latest tax legislation, but this benefit phases out for high-income earners.
  • Summary: For residents in high-tax states like New York or California, the SALT deduction increase to $40,000 provides significant relief compared to the previous $10,000 cap. However, this benefit begins phasing out for total income exceeding $500,000, returning to the $10,000 limit at $600,000 of income. This change necessitates tactical income deferral discussions to maximize the deduction in the current year.
2026 Charitable and Deduction Limits
Copied to clipboard!
(00:17:40)
  • Key Takeaway: Upcoming 2026 legislation imposes a floor on charitable deductions (the first 0.5% of AGI is nondeductible) and limits overall deductions for those in the top 37% tax bracket.
  • Summary: For 2026, the first 0.5% of Adjusted Gross Income (AGI) given to charity will provide zero federal tax benefit, making 2025 a potentially more attractive year for charitable deductions. Furthermore, taxpayers in the 37% bracket will have their overall deductions limited, effectively treating them as 35% taxpayers, reducing the value of deductions like SALT and mortgage interest. This drives a strategy to accelerate deductions into 2025 for the highest-income clients.