Simple End of Year Tax Tips You Need Now!

So, here we are, middle of November. The end of the year is quickly approaching. This is the perfect time of year to do some tax planning, to go through, look at your current situation, do some projections, make sure that you're not going to get blindsided by some big ass tax bill come filing time, and also make sure that you're not leaving any of the lowhanging fruit out there that you're not taking advantage of before the calendar flips over to 2026. I hope that you find this one helpful. Let's get to it. All right, so before we get into it, just my disclosure. I am not a CPA. Nothing in here is tax advice. Don't take anything that I tell you and run with it. Make sure to consult with your own tax advisor. So now the tax code, it is very complex, but at the end of the day, what it really is, it is a code of incentives. The government incentivizes you to do certain things, to take certain actions. Like for example, they want you to save for retirement. So they give you a tax deduction if you contribute to your 401k. or they want you to be a business owner, start small business and employ people and they give you certain tax deductions for going ahead and taking the risk and doing that or investing in real estate. Real estate can be very tax friendly. So there's specific parts of the code that incentivize you to invest in specific demographics or to buy multifamily real estate or to invest in single family homes for people. The way that you are taxed on that income is different than the income that you earned at a W2 job. But for the purposes of this video, we're going to talk about being a W2 employee and how you could actually reduce your tax bill by just taking advantage of what is written in the code for you. Now, our tax system is called a progressive tax system. And what that means is that you are taxed at a certain bracket, at a certain percentage on different amounts of income that you make. So, for example, if you are married filing joint, you are taxed 10% on the first $23,850 of taxable income that you earn. And then every dollar above that up until $96,950, you are taxed at 12% on that dollar amount. And then for every dollar that you earn over $96,950, you are taxed at 22% up to $26,7 and so on and so on. So if you earn over $751,000, then every dollar that you earn above that is taxed at 37%. You would be considered in the 37% marginal tax bracket. But that doesn't mean all of your money is taxed at 37%. Still, if you're in that tax bracket, your first $23,850 is taxed at 10%. And then the money, it just goes through those brackets. You're taxed at those different incremental levels for each bracket. So your marginal tax bracket, it will be a big determining factor on things that you should do. Like for example, if you are in a 10% marginal tax bracket, meaning your income is very low, then it makes sense to do Roth contributions into your 401k or Roth IRA contributions as opposed to doing traditional 401k contributions because with a traditional, you're going to get a tax deduction. And if you're only in the 10% tax bracket, the tax deduction is not as valuable right now. You might as well go Roth and let that money grow tax-free. The same can be said for a 12% tax bracket. You are better off doing Roth contributions as opposed to doing traditional contributions. All right. So, now that we have a better understanding of how tax brackets work, let's talk about how you could actually reduce your taxable income throughout the year. And the first one is not going to be a surprise to anybody. It is taking advantage and maxing out your retirement accounts. Now, depending on what tax bracket you are in, it might make sense to do traditional versus Roth, right? But let's just make the assumption that you're in a 22 or a 24% tax bracket. In that case, I do like to split it sometimes, but again, it depends on your personal situation and how much money you actually have in each of those tax buckets. How much you have in traditional, how much you have in Roth. But let's say your goal is to reduce your taxable income right now, right? And defer it into the future. A traditional 401k is a great way to do that, and you have until the end of the year to max out at 23,500. Now, the problem is that it's hard to max out now because it's payroll deducted, but you still have time where if you were to change this immediately, your last few paychecks, you could put a big majority of your paychecks in there if you have some savings in the bank where you don't need those paychecks right now and try to defer this money. But even going forward into next year, just getting into the habit of deferring as much as you can into your traditional 401k, that is a great way to easily reduce your taxable income. And not only that, you're saving for your retirement. you're going to be happier in retirement the bigger that pile of money is that you have to draw on once you walk away from work. Now, if you are ages 50 or older, then you could do a catch-up contribution, which is an additional $7,500. And starting this year, if you are between the ages of 60 and 63, your catch-up contribution is actually increased to $11,250 instead of that $7,500. Now, for IAS, you have to make sure that you qualify. So the income limits are pretty low to be able to deduct traditional IRA contributions, right? And then you have Roth IRA contributions where the income limits are much higher. So you have to check where you fall with those income limitations. But you're able to contribute $7,000 a year into either a traditional or a Roth IRA, or you could do a combination of the two. And if your age is 50 or older, then you have a $1,000 catchup contribution. Now, I am a big fan of contributing to Roth IAS. I think it's the best way that you could save for your eventual retirement. Again, I talk a lot about tax diversification, right? These tax buckets, having money in traditional accounts, having money in Roth accounts, and then having money in brokerage accounts as well, accounts that are not just designated for retirement, and walking in with those three different tax buckets. So, you actually have some control over the tax rates that you pay once you get into retirement. But overall, retirement accounts, they're a great way to either defer taxes now or to pay taxes now and then have money grow tax free forever. And you want to be taking advantage of these things. I know the cash flow is tight in the current environment and everything, but you want to do the best you can to get into the habit of contributing for retirement, increasing it every year, and trying to get to that maximum amount so that you could retire one day and you can enjoy yourself and and have some fun. So now, other accounts that you want to be taking advantage of if they're available to you, and that is an HSA and an FSA. So, an HSA, a health savings account, you have to have a high deductible health plan in order to contribute to an HSA. And I've made videos on this in the past, how they are the best type of retirement account that exists. You get the tax trifecta. You get a tax deduction when you put the money in. The money grows tax deferred, and then as long as you use it for qualified health care expenses, it comes out tax-free. And I love to invest inside of my HSA. I try not to use any of that money. I try to pay out of pocket for my health expenses and let that HSA grow for retirement. So when I go into retirement, I'm going to have this pool of money that I could use for qualified expenses. And you could actually keep all of your receipts through the years and reimburse yourself later on. So for example, if I went to the doctor eight years ago and it cost me $5,000 out of pocket, I could right now reimburse myself out of my HSA and match up that receipt that I paid that $5,000. Take an HSA withdrawal and it'll be completely taxree. I want to do that. I want to keep all my receipts on a nice Google Drive folder, nice and clean. And later on in life, if I need to pull money, I could just go ahead and reimburse myself for those out-ofpocket costs. In the HSA limits for 2025, if you are single, it's $4,300. And if you are married, if you have a family, then it's $8,550. But you have to make sure that you have a qualifying high deductible health plan in order to use an HSA. Now, for FSAs, for flexible spending accounts, you just want to make sure that you are using the money that you deferred into there before the end of the year. If that's what your calendar, if your plan goes on a calendar year, if you have to get it out of there before the end of the year or it's a use it or lose it type of plan. So, you just want to be on top of that and make sure that you are not contributing to that where you get a tax deduction and then you're not using the money and you lose it to the plan. This is also the time of year where it's smart to check your withholding and your estimated tax payments for the year. You just don't want to get hit with a big bill in April when you file your return. So if you had big capital gains, if you sold something that had a very big gain in it and you didn't pay any estimated tax towards it, you want to take care of that and just do some tax projections and see, you know, are you having enough withheld based on your income so you don't get slammed in April. Another popular buzzword that you hear people throw around is tax loss harvesting. So you want to see, do you have any positions in a brokerage account? So not retirement accounts, but if you have a brokerage account where you have some losers in there. So, if you bought a stock for $100 a share, and now it's down to $70 a share, and maybe you don't really want to own that stock anymore, right? Maybe it's something that you could sell and buy back later on down the road, take the tax loss now, right? You could offset gains versus losses and try to get it where you don't have these big capital gains. So, it's worth looking through your brokerage account and just seeing how your positions have done, what you've made money on, what you've lost money on, and see if there are things that you could sell to maybe take a tax loss for the year. Now, if you have a very big loss, the maximum that you're able to take is $3,000 per year and then the rest will just be carried over to future years. So, it's not like you lose it. So, if you have a $15,000 loss that you're taking, you could take $3,000 against your ordinary income and then the additional $12,000 that will roll over to the next calendar year, but you could offset gains. So, if you have $15,000 in gains, $15,000 in losses, then it's just a wash and you won't owe any taxes on the gains because the the loss will have wiped that out. But it's always good to look through that, you know, this time of year and see, are there any opportunities for you to tax loss harvest? And it's also worth mentioning that there might be an opportunity to tax gain harvest. So, say for example, you had a very low income year. Maybe you were laid off. Maybe you didn't work for a majority of the year and you ended up living on savings or, you know, whatever the case may be, you might have gains in the brokerage account where you could still be in the 0% capital gains tax bracket. So for 2025, the 0% capital gains tax bracket is $96,700. And if you're single, it is half of that. So if you're in a situation where you really didn't have much income this year and you do have stocks that have capital gains, it could be a very good time to sell. And then on top of that, like low income years are actually great tax planning years. You might have opportunities to do Roth conversions. You might be able to fill up a 10% tax bracket in Roth conversions and it might make sense for you to do that. If you have kids, 529 plans, you want to save for college for them. That is a great way to go about it. There's a lot of tax advantages to using those plans. A lot of states offer a state tax deduction. Like here in New York, if you are married filing jointly, you could get a New York state tax deduction for up to $10,000 in 529 contributions. But even beyond that, there are big tax advantages. The money that you put in the 529 plan, it is going to grow tax-free. So you drop money in there, if you have a one-year-old, a 2-year-old, a three-year-old, that money has 15 plus years to grow. It's going to grow taxree. And then when you use it for higher education, then that money will come out completely tax-free as long as it is a qualified expense. And the definition of that has been expanding each and every year. You could use $10,000 now for K through 12 private school as well. Now, you are also allowed to do a transfer from a 529 plan into your child's Roth IRA. I did a video on this in the past. Um, it's only been available for a year or so. I've done this with my son. They do have to have earned income and then you could go ahead and you can make a Roth IRA contribution for them. But it's just another incentive to put money into a 529. Like with my son, he's 18 years old right now. I started when he was born. That money's been growing taxree for 18 years and now I take a chunk of it. I make a Roth IRA contribution for him and now it's going to grow taxree for the rest of his life until he takes it out in retirement. So it's just a great way to get this tax-free growth and never have to pay taxes on that money. And now this is also a great time of year to check beneficiaries to look at your estate plan. If you gift money to family members if you're looking to get money out of your estate, you could do up to $19,000 per individual without having to file a gift tax return. But also just checking your beneficiary designations. It's always good to do that at least once a year. And why not the end of the year when you're doing some tax planning. All right, everyone. That is it for this video. I hope that you found this one helpful. Please hit the like button if you enjoyed it. Subscribe to the channel if you're not subscribed yet. Check out schoolofpersonalfinance.com. I show all the different ways you can work with me on the website there. And I will see you again in the next video.