Year-End Tax Planning: Moves to Make

Several core moves are worth reviewing while you still have time to act.

Tax-loss harvesting lets you sell investments that have declined in value to offset realized gains. Within limits, realized losses can also offset a portion of ordinary income. Harvesting losses in the fall has an added advantage: the wash sale rule, which prevents repurchasing the same security for 30 days, expires sooner. This gives you a chance to repurchase and potentially harvest losses again before December 31. Think of this as building a reserve of losses that can be useful in future years as well as this one.

Maxing out retirement account contributions is more manageable when you start in the fall. Spreading contributions over several months is easier than making one large contribution at year-end.

Roth conversions are also ideal to begin in the fall. You have accurate income data, and starting early helps avoid administrative delays and year-end processing backlogs.

A second tier of moves includes checking your Flexible Spending Account (FSA) or Health Spending Account (HSA) progress during open enrollment, monitoring your Net Investment Income Tax threshold if you are a high earner, and reviewing Qualified Business Income (QBI) phase-outs if you own a business. If you have no formal withholding through an employer, the September 15 estimated tax deadline is your last chance to catch up and potentially avoid underpayment penalties.

Which of these moves matters most depends heavily on your life stage, which sets up the next section naturally. Stay tuned for Part 3. READ | Year-End Tax Planning: Why Timing Matters