Four Year-End Tax Planning Strategies

Key Takeaways

• Convert traditional IRA funds to Roth IRAs before December 31st to lock in tax-free growth at lower current valuations; act by early December to ensure custodian processing completes on time, and have cash available to pay conversion taxes due immediately
• Contribute highly appreciated stock (not cash) to a donor-advised fund to get an immediate tax deduction while eliminating capital gains taxes on the appreciation, then distribute to charities over multiple years at your own pace
• If age 70.5+, use Qualified Charitable Distributions (QCDs) to donate up to $100,000 annually directly from your IRA to qualified 501(c)(3) charities; this satisfies RMD requirements without triggering ordinary income tax or increasing Medicare premiums
• Withhold estimated taxes from year-end IRA required minimum distributions by December 30th to avoid quarterly estimated tax payment penalties; the withholding counts as prorated payment for all four quarters if completed by this deadline
• Implement tax planning year-round rather than only at year-end; review income sources and deductions throughout the year to identify ongoing opportunities, and consider multi-year Roth conversion strategies if markets remain down