With 2026 rapidly approaching, it is once again time to review year end tax planning strategies and uncover ways for you to save. While the list of items to check is mostly the same as in prior years, there is one notable change.  

This year, the One Big Beautiful Bill Act (OBBBA) was signed into law. Although many of its provisions take effect beginning in the 2026 tax year, several important changes start this year. Let’s discuss what you should be watching as the year comes to a close. 

Retirement Account Contribution Strategies for 2025

It’s important not to miss the opportunity to contribute to tax-advantaged retirement accounts. Once the deadline passes, you cannot go back and make contributions for prior years. Contribution deadlines vary by account type but are typically either December 31 or the tax filing deadline, April 15.

401(k), 403(b), and TSP Contributions

If you are an employee, you likely have access to one of these plans. The annual contribution limit for 2025 is $23,500, plus a $7,500 catch-up contribution if you are age 50 or older. A new rule beginning in 2025 also introduces an enhanced catch-up contribution of $11,250 for individuals ages 60 through 63, which replaces the standard catch-up amount. That’s a significant amount of tax-advantaged savings each year.

All contributions to employer plans must be made by December 31. We encourage you to review your year-to-date contributions to see whether you’ve maximized your employer retirement plan. If you haven’t maxed it out this year, that’s okay. You can revisit your contribution strategy for 2026 to determine if you’re able to contribute more next year.

Traditional IRA and Roth IRA Contributions  

These accounts offer tax benefits similar to those in employer retirement plans but come with their own rules and deadlines. Contributions for the 2025 tax year can be made up until April 15, 2026, which allows time to determine whether a contribution is allowed or beneficial based on your specific tax situation.  

2025 Annual IRA Contribution Limits: 

• Traditional IRA and Roth IRA: $7,500 

• Additional catch-up contribution (age 50+): $1,000 

Deciding whether to contribute to a Traditional IRA or a Roth IRA can be complex, as eligibility and benefits depend on income levels and other factors. Because of these nuances, it’s often worthwhile to consult a tax professional or financial advisor to determine the best approach for you.

Health Savings Accounts (HSAs) Contributions 

HSAs are a unique type of account with their own set of benefits and rules. Contributions can be made as late as April 15. Eligibility depends on having a qualifying, high-deductible health plan.  

2025 Annual HSA Contribution Limits: 

• Self-only coverage: $4,300 

• Family coverage: $8,550 

• Additional catch-up contribution (age 55+): $1,000 

The primary appeal of HSAs is that they are triple tax advantaged. Contributions are tax deductible and roll over year-to-year. Growth is tax free and withdrawals are tax free when used for qualified medical expenses. If you are eligible, this is an account you don’t want to overlook. 

Charitable Contributions 

We never recommend giving to charity solely for the tax benefits; it just doesn’t make financial sense. However, if charitable giving is already part of your plan, it’s worth doing so in the most tax-efficient way possible. Two particularly effective strategies are donor-advised funds and qualified charitable contributions. 

Donor Advised Funds and Tax Deductions 

Donor-advised funds, or DAFs, allow you to contribute a lump sum, often most beneficially in the form of appreciated stocks or mutual funds, to a fund that will distribute grants to charities over time. Because you relinquish ownership of the assets in the year of contribution, you are entitled to a charitable deduction as if you had donated directly to the charities. While direct giving is always an option, DAFs can be a useful way to spread donations over multiple years while taking the whole deduction in one. 

One change introduced by the OBBBA is a new 0.5% of Adjusted Gross Income floor on charitable contribution deductions beginning in 2026. In simple terms, this means deductible charitable contributions will be reduced by 0.5% of your income.  

This is somewhat offset by a new non-itemized charitable deduction of $1,000 for single filers and $2,000 for married filers, which is not subject to the floor. If you typically give more than $1,000 to $2,000 per year, it may make sense to consider bunching charitable contributions before the new rules take effect. 

Qualified Charitable Distributions (QCDs) 

Qualified charitable contributions, or QCDs, are another powerful option for individuals over age 70½ who have IRAs. These allow you to direct IRA distributions straight to qualified charities, which are then excluded from your taxable income.  

Effectively, a QCD functions like a deduction while also avoiding the new 0.5% charitable contribution floor. Just be sure these donations are reported correctly on your tax return to receive the intended tax treatment.

Required Minimum Distributions 

If you have pre-tax IRAs or employer-sponsored retirement plans, there will eventually come a time when you are required to take distributions from those accounts. These are known as required minimum distributions, or RMDs.  

The age at which RMDs begin depends on your date of birth and currently ranges from age 73 to 75. Once RMDs begin, it’s critical to take the required amount by December 31 each year to avoid significant penalties on any undistributed amount. One silver lining is that qualified charitable distributions count toward satisfying your RMD requirement. 

Side note: RMDs are not only for those in their seventies. If you inherit a beneficiary IRA, you may be subject to RMDs much earlier than you’d think. In that case, it’s important to be very careful about handling that account regarding distributions and staying in line with beneficiary IRA rules.  

Affordable Care Act Subsidies and Income Planning 

For our self-employed and pre-Medicare retiree clients, the Affordable Care Act (ACA) marketplace insurance subsidies are an incredibly important part of the tax picture. If you are covered under one of these plans and receive subsidies, then it’s important to know that the OBBBA did not extend certain Covid-era subsidy enhancements.  

That means the amount in premium subsidies you receive through the Premium Tax Credit will likely be reduced, assuming all else equal. This makes it especially important to be thoughtful during open enrollment and when estimating income. Additionally, if you are considering year-end income tax planning strategies such as Roth conversions or capital gain harvesting, the impact on ACA subsidies should be carefully factored into that decision. 

Roth Conversions and Capital Gain Harvesting 

Two of the most effective tax planning strategies to consider before year-end are capital gain harvesting and Roth conversions. Both are most effective when one can reasonably assume that tax can be paid today at a lower rate than would be expected in the future. 

Roth Conversion Rules 

Roth conversions involve moving pre-tax retirement account dollars directly into a Roth account and paying ordinary income tax in the year of conversion. All growth of those dollars will be in the tax-free Roth and able to be withdrawn tax free in the future.  

This tool is excellent if you are in a lower marginal bracket this year than you would be in the future when drawing on Social Security and subject to RMDs. If Roth conversions could benefit you, they need to be done before December 31 to count for the 2025 tax year.  

Capital Gain Harvesting Rules 

Capital gain harvesting is like Roth conversions in that it accelerates future income into the current year. However, rather than manipulating ordinary income brackets, this strategy takes advantage of long-term capital gains tax brackets.  

Long-term gains are subject to either 0%, 15%, or 20% tax under current law. That means if your income is below a certain threshold, you can realize investment gain for free. This strategy can be a no-brainer for many as it incurs no tax but be careful applying it to your own situation because it could have unintended consequences not immediately apparent. Consulting a professional would be worthwhile before committing to income-accelerating strategies such as these.  

Estimated Tax Payments and Penalty Avoidance 

Income tax operates on a pay-as-you-go system, which requires taxes to be paid throughout the year as income is earned. To enforce this, the IRS imposes penalties on taxpayers who do not follow the rules. These underpayment penalties can become quite large if the amount underpaid is significant. As taxpayers, we want to avoid paying more than required, and penalties cause us to do exactly that. 

For most taxpayers, estimated tax requirements are satisfied through payroll withholdings. However, certain types of income cannot be subject to withholding, such as self-employment income and realized capital gains. Other common situations that may require estimated tax payments include under-withheld supplemental wage income reported on W-2s, and income generated from Roth conversions. Regardless of the source, the deadline for making estimated tax payments related to income received late in the year is January 15, 2026.  

This time of year is ideal for determining whether you have paid enough, how much you may be short, and whether that shortfall could result in estimated tax penalties. Because these calculations can be somewhat complex, it is often helpful to work with a tax professional to determine the appropriate payment amount. 

Taxes and financial planning are complex, but you don’t have to navigate them alone. A financial advisor can help you stay informed about tax law changes, optimize your savings and investments, and avoid costly mistakes. If you need tailored guidance, our team is here to help. Reach out to us at (603) 589-8010 to integrate tax planning into your comprehensive financial strategy.