Year-End 2025 Planning Opportunity Checklist
As 2025 comes to a close, now is an ideal time to review your year-end tax strategies and plan ahead for 2026. Below is a checklist of key items to consider before year end:
Required Minimum Distributions (RMDs)
If you are age 73 or older in 2025, or have an inherited IRA that you received before 2020, you must take your Required Minimum Distribution by December 31.
Inherited IRA & Roth IRA RMDs (Under the 10-Year Rule)
Beneficiaries of inherited IRAs where the decedent passed after December 31, 2019, are subject to the SECURE Act’s 10-year distribution rule:
- Eligible designated beneficiaries (e.g., a surviving spouse, an individual not more than 10 years young than the decedent, a disabled or chronically ill individual, or a minor child) may use the lifetime distribution rules or elect to use the 10-year rule.
- Non-eligible designated beneficiaries:
- If the original owner reached their required beginning date, annual RMDs are mandatory.
- If not, annual RMDs are not required, but the account still must be fully distributed by the end of year 10.
- Inherited Roth IRA: No annual RMDs are required, but the account must be fully withdrawn by the end of year 10.
Year-End Gifting & Charitable Strategies
Evaluate your 2025 charitable and family gifting goals to ensure they’re being met in a tax-efficient manner. There are several strategies that a WESCAP advisor can recommend depending on your situation, such as:
Qualified Charitable Distributions (QCDs): If you’re 70 1/2 or older, you can make QCDs directly from your IRA. Once you reach age 73, these QCDs can also count toward satisfying your RMDs while helping to reduce your taxable income. In 2025, the annual QCD limit is $108,000. Keep in mind that QCDs cannot be made to either a Donor-Advised Fund (DAF) or to a private foundation (operating or non-operating).
You can also make a one-time QCD of up to $54,000 to a Charitable Remainder Unitrust (CRUT), a Charitable Remainder Annuity Trust (CRAT), or a Charitable Gift Annuity (CGA).
Itemized Deductions and “Bunching” Strategies: If you itemize deductions on your tax return, donating cash or appreciated stocks to a qualified charity will give you a higher tax deduction. Be sure to retain receipts and track your contributions accurately. For appreciated stocks, you can deduct their fair market value and avoid capital gains taxes.
Starting 2026, itemizers can only deduct contributions that exceeds 0.5% of their Adjusted Gross Income. This change may make it practical to accelerate charitable giving into 2025.
To maximize tax benefits, consider a “bunching” strategy. This involves grouping multiple years’ worth of charitable donations into a single tax year to exceed the standard deduction. This approach is effective if your total deductions typically hover near the standard deduction threshold.
Beginning in 2026, non-itemizers will have an above-the-line charitable deduction of up to $1,000 for individuals and $2,000 for married couples filing jointly. Contributions must be in cash to qualified public charities; contributions to Donor Advised Funds and private foundations are not eligible.
Donor-Advised Funds (DAF): A flexible way to donate to charity which allows you to contribute to the fund in one year and decide the specific charitable recipients later. You receive an immediate tax deduction in the year you contribute to the fund.
Family & Friend Gifting: In 2025, you can gift up to $19,000 per individual ($38,000 for married couples) without using your lifetime gift exemption. For amounts over this threshold, file Form 709 on your tax return, though no taxes are due until your lifetime exemption is exhausted. For larger amounts, you may want to structure them as loans, which can be forgiven over time.
Direct Gifts of Appreciated Assets: Gifting appreciated assets, such as stocks, that have increased in value can minimize your capital gains taxes. These assets can be gifted to charities, Donor-Advised-Funds, or family and friends.
Year-End Investment and Tax Strategies
Increased Standard Deduction: The One Big Beautiful Bill Act (OBBA) increased the standard deduction to $15,750 for single filers and $31,500 for those married filing jointly. Individuals over age 65 receive an additional $2,000 for single filers or $1,600 each for joint filers. Furthermore, from 2025-2028, there is an enhanced senior deduction of up to $6,000.
These higher deduction limits create planning opportunities for Roth Conversions or capital gain harvesting at the 0% tax rate.
Roth IRA Conversions: If you expect to be in a low-income tax bracket this year, consider converting traditional IRA assets to a Roth IRA. This allows you to lock in tax savings and enjoy tax-free growth and withdrawals later.
Roth conversions can provide additional tax-savings to heirs. Under the 10-Year Rule, inherited pre-tax accounts can create significant tax burdens, as beneficiaries must withdraw all funds within ten years. By contrast, heirs often benefit from inheriting a Roth IRA, as withdrawals are tax-free and there are no RMDs until the 10th year when the account is emptied.
Backdoor Roth Conversion: High-income taxpayers with little or no pre-tax IRA assets can take advantage of backdoor Roth conversions. This involves making a non-deductible IRA contribution and later converting to a Roth IRA. This conversion is tax-free, assuming you have no pre-tax IRA assets.
Harvest Losses: If you have investments with unrealized losses, consider selling to offset capital gains. Any unused losses can reduce up to $3,000 of ordinary income and can be carried forward to future tax years indefinitely.
Harvest Tax-Advantaged Capital Gains: If individuals have low taxable income, it may be prudent to harvest capital gains, as federal capital gains tax rates may be as low as 0% for single filers with taxable income under $48,350 or joint filers with taxable income under $96,700.
Avoid Large Capital Gains Distributions: Review mutual fund holdings and look to avoid significant year-end capital gains distributions by selling these funds prior to the dividend record date. Additionally, you should avoid purchasing some mutual funds toward the end of the year in taxable accounts, instead using ETFs to avoid capital gains distributions.
Accelerating or Postponing SALT Payments: The SALT deduction was increased to $40,000 for 2025-2030. This deduction phases out by 30% of income in excess of $500,000. Prepaying state or property taxes may be prudent if you’re under the $40,000 cap limit and the $500,000 income phase out limit.
Extra Catch-up Contributions for Individuals 60-63: Individuals aged 60-63 in employer sponsored retirement plans (401K, 403B, profit sharing) have an increased catch-up contribution of up to $11,250, instead of the normal $7,500.
Further Planning Opportunities Before and After Year End
Retirement Projections: WESCAP Group offers retirement income projections to ensure you’re on track to meet your long-term goals. We recommend this for individuals who are currently concerned about their long-term financial security or are expecting significant life or financial changes.
Social Security Analysis: If you are approaching 62, WESCAP can help analyze when to begin Social Security benefits to maximize your income.
Education Funding: Contributing to a 529 education savings account for a child or relative allows you to fund education tax-free. In 2025, you can contribute up to $19,000 per donor, per child, or use a lump-sum contribution of up to $95,000 (with five years of gifting allowed in advance).
Contact WESCAP Group if you would like to schedule a time to talk about your specific situation.