Tax-saving moves to consider before year end

Proactive investors can benefit from making strategic adjustments that can reduce next year’s tax bill.

As the year comes to a close, it may be a good time to check on your investments with an eye toward tax implications. Keeping long-term investment goals in mind, a trusted advisor can help you consider adjustments that could impact your typical year-end planning.

Manage your income and deductions

If you’re at or near the next tax rate threshold, pay close attention to anything that might tip some of your earnings into the next range and consider ways to reduce your taxable income before the end of the year. Determine whether it makes sense to accelerate deductions or defer income to minimize your current tax liability.

Certain retirement plans also can help you defer taxes. Contributions to a traditional 401(k) are made with pre-tax dollars, which lowers your income by the amount of the annual contribution. You won’t pay income tax on the contribution and earnings until the time of the withdrawal, at which point your income and tax rate may be lower or you may have more deductions available to offset the income.*

Contributions to a health savings account (HSA) can reduce taxes too. Your pre-tax payroll deductions reduce income, and any after-tax contributions can be deducted on your tax return, even if you don’t itemize. Remember, your HSA funds can be withdrawn tax-free for qualified medical expenses and never expire.

To harvest or not to harvest

Tax-loss harvesting – selling an investment at a loss – has the potential to help offset gains. If your capital losses exceed your capital gains, a portion of your excess losses can be used to offset ordinary income and additional losses can be carried forward to future years.

You’ll want to be mindful of harvesting losses in a manner that doesn’t disrupt your long-term investment strategy. Additionally, understand wash sale rules, which limit the ability to buy a “substantially identical” security within a set timeframe.

Mind your RMDs

Investors who reach a certain age are required to take RMDs from their IRAs. You face a 25% tax penalty on amounts not withdrawn from your IRA to meet the RMD, so you’ll want to confirm you’ve met your obligations.

Taking a distribution will impact your taxable income or tax bracket. If you are in a lower tax bracket, consider taking an additional strategic distribution at that lower rate.

Your first RMD can be delayed until April 1 of the year after you reach 72 or 73 (depending on your year of birth). If you delay, however, you must also take your second RMD in the same tax year. This can inflate your income, which may affect your tax bracket.

Note: To streamline the process, RMDs can be automated to help ensure you don’t miss applicable deadlines.

Evaluate changes

From welcoming a new family member to moving to a new state, these life changes can impact your financial situation. Bring your financial advisor up to speed on major life changes and ask how they could affect your year-end planning.

Moving can significantly impact tax and estate planning, especially if you’ve relocated from a high income tax state to a low income tax state, from a state with a state income tax to one without (or vice versa), or if you’ve moved to a state with increased asset protection.

Additionally, legislation passed this year under the One Big Beautiful Bill Act introduces several new deductions in 2026. Consult your tax professional to determine if they are available for you and if there’s anything you can do in preparation to take advantage of the changes.

With the new year on the horizon, now’s the time to schedule your year-end planning review.

*Withdrawals from qualified accounts, such as an IRA, prior to age 59 1/2 may also be subject to a 10% federal penalty tax. RMDs are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.