Credits, Custody, and Capital Gains: Tax Tips to Wrap Up the Year Right
Kids, credits, and custody. If you have children, make sure you’re claiming all the tax breaks you're eligible for, including the Child Tax Credit and Child and Dependent Care Credit. If you share custody, confirm who’s claiming each child this year. The IRS doesn’t allow double-claiming, and mistakes here can delay your refund.
Gifts, giving, and generosity. Donating to charity before the end of the year can help reduce your tax bill if you itemize. You might also want to look into giving directly from your IRA if you're over 70½ using a Qualified Charitable Distribution. And remember, you can give up to $19,000 per person ($38,000 if married) without triggering gift taxes. It’s a smart way to support loved ones and lower your taxable estate.
Deferrals, deductions, and deadlines. Timing matters. If your income will be lower in 2026, think about deferring bonuses or freelance payments until January. If you itemize deductions, it might make sense to pay certain 2026 bills now, like medical expenses or property taxes, to claim them on your 2025 tax return. Also, keep track of key deadlines for retirement contributions, HSAs, and FSAs.
Stocks, sales, and strategy. Check your investments before year-end, as selling losing stocks to offset gains can lower your tax bill. Just don’t repurchase the same investment within 30 days, or you’ll lose the write-off. If you’re thinking about selling winning investments, decide if it’s better to sell now or hold for future tax years.
Roths, rollovers, and recharacterizations. Converting money from a traditional IRA to a Roth IRA means paying taxes now, but avoiding them later. This move can make sense in a low-income year. If you’ve switched jobs, you might want to roll over your old 401(k) to an IRA for more control over what you can invest in. And if you made a Roth contribution but your income ended up too high, talk to your advisor about fixing it through recharacterization.
Business, bonuses, and buybacks. If you’re self-employed or run a small business, you can make equipment purchases or issue bonuses to lower your taxable income. Investors should also pay attention to end-of-year dividends or stock buybacks, which can add to your income even if you reinvest them.
Medical, mileage, and miscellaneous. Medical expenses that exceed 7.5% of your income can be deducted if you itemize, so it’s worth tallying up your out-of-pocket costs. Keep track of any mileage for medical visits or charitable work. And if you’re a teacher or self-employed, you may still qualify for some smaller deductions.
Insurance, income, and inflation. Now’s a good time to review your health insurance, especially if you get help through the marketplace. Make sure your income estimate is accurate to avoid giving back credits at tax time. Also, inflation affects things like deduction phaseouts and tax brackets starting in January, so factor them into your planning.
Accounts, audits, and adjustments. Take a few minutes to double-check your accounts and make sure your paperwork is in order. Fix errors before tax season hits. If anything major changed this year, such as marriage, divorce, or a new job, make sure your tax plan reflects it. A little prep now can prevent bigger issues later.