Charitable Giving Archives

Year-End Tax Planning: Smart Moves to Save You Money

Ever feel like the holiday season is too quiet? Maybe not enough going on? Boring, even?

Well, I have a little gift for you. It’s the perfect time to add some year-end tax planning to your life!

And for a few reasons...

As the year comes to a close, you have a pretty good idea of what your actual income will look like, along with other variables that impact your tax outcome.
With the new year just around the corner, you likely have a sense of how things will look in comparison to the one that’s closing out.
Occasionally, in years such as this, there is new legislation that creates opportunities and/or hurdles to consider from one year to the next.

Here are 7 end-of-year tax planning strategies to consider as 12/31 approaches:

Compare your total estimated tax bill to your actual taxes paid
Top off tax-advantaged investment accounts
Optimize 529s for state income tax deductions or credits
Explore opportunities for tax-loss harvesting
Consider tax-gain harvesting
Assess the potential for Roth conversions
Maximize your charitable donation strategy

Compare Your Total Estimated Tax Bill to Your Actual Taxes Paid Before December 31st

For starters, it’s helpful to have a heads-up on where you stand with Uncle Sam. Have you overpaid, putting you on pace for a large refund? Have you not paid enough to the IRS, potentially even exposing yourself to an underpayment penalty? Not only do we want to eliminate surprises, but also allow for enough time to make some final adjustments before the year closes.

Most people – as employees of a company – have money automatically taken out of their paychecks to cover federal taxes and state taxes. But simply having it withheld doesn’t mean it’s the right amount, especially if you have other types of income aside from your salary. Other individuals, such as business owners, those with large amounts of investment income, or people with supplemental income like RSUs, may be making quarterly estimated tax payments. But again, as things shift throughout the year, it’s necessary to confirm you’ve been paying an appropriate amount.

End-of-year projections can be very powerful

Here at Upbeat Wealth, we run tax projections for all of our planning clients toward the end of the year to assess where they stand with the IRS. If you want to give it a shot on your own, check out the IRS’s tax withholding estimator tool.

At a minimum, you’ll want to be sure you’re going to cross over the Safe Harbor threshold

If you don’t give the IRS enough of your total tax liability during the calendar year, they will assess an underpayment penalty. The key here is that the IRS likes to get its taxes when the income is earned. To avoid a penalty, the IRS (and states) have the Safe Harbor rule for determining the minimum you need to pay. You won’t be penalized if you meet at least one of the following:

Owe less than $1,000 in tax for the current year.
Pay at least 90% of the total tax bill for the current year.
Pay at least 100% of the tax you owed for the previous year. This bumps up to 110% of the previous year’s tax bill for those with an AGI over $150k (over $75k if married filing separately).

Making sure you’re in the clear with this rule can protect you from paying any extra amount to the IRS in the form of penalties.

Top Off Tax-Advantaged Investment Accounts

Now is a great time to see how you’re doing with contributions to certain investment accounts that have a December 31st deadline for the tax year. These include:

Employee contributions to workplace retirement plans, such as a 401k, 403b, etc.
Health Savings Account (to make the contributions via payroll deductions, which allows you to avoid FICA taxes on the amount contributed)

These accounts have a maximum annual contribution limit set by the IRS (which is typically adjusted every year or two). If you’re not already on a path to hit that amount, consider adjusting your payroll deferral percentage to direct surplus cash flow into any of these accounts you have access to so you can get there by year’s end.

What are the annual IRS contribution limits?

2025 Max for 401ks and 403bs
- $23,500
- + $7,500 for age 50+ ($31,000 total)
- + $11,250 for ages 60-63 ($34,750 total)
2025 Max for HSAs
- Self-Only: $4,300 (+ $1,000 for age 55+)
- Family: $8,550 (+ $1,000 per eligible spouse age 55+)

On a separate note, keep an eye on the balance in any Flexible Spending Accounts since these are of the “use-it-or-lose-it” variety.

Optimize 529s for State Income Tax Deductions or Credits

If you’re saving into a 529 for your child’s education, or plan to, take a close look at your home state’s tax rules. Over 30 states offer either an income tax deduction or credit for contributions made to a 529 if it’s established through their own program. The available benefits are different from state to state.

Explore Opportunities for Tax-Loss Harvesting

If you have any losses in a taxable brokerage account, you can benefit from “capturing” (or harvesting) those investment losses. By selling a position that is in the red, you “realize” that loss (considered “unrealized” until a sale occurs) and can use it to offset other investment gains you may have realized during the year. If you don’t have any gains to knock down (or if your losses exceed your gains), you can use up to $3,000 of investment losses ($1,500 if filing MFS) to reduce your ordinary income for the year, carrying any remaining losses into future years for use.

Example:

Let’s say Marcus sold “investment X” earlier in the year for a gain of $5,000.

At the end of the year, he sells “investment Y” and realizes a loss of $12,000.

When preparing his taxes, he can use his $12k in losses to “offset” his $5k in gains. This results in a net $0 of investment gains for the year, thus no taxes on that investment income.

Now, he still has $7k of unused losses. He can use $3k of that to reduce his income for the year. Finally, he has $4k in losses that will carry forward to the next tax year.

The Finer Details

When doing the math, you have to first net short-term capital losses against short-term capital gains. Then, separately do the same with long-term capital losses and long-term capital gains. Next, you net those two amounts against each other (if you have a gain/loss for each).

At tax time, Form 8949 and Schedule D are used to report your capital gains and/or losses.

Be careful with the Wash Sale Rule

What the rule says: If you buy the same investment, or a “substantially identical” security, within a 30-day window before or after selling it at a loss, then that loss is disallowed. That means you miss out on the tax benefit. In other words, you cannot use that loss to reduce other investment gains or income. An important note is that the rule applies across all accounts that both you and your spouse own, if you’re married.

Crypto is different

Notably, the wash sale rule does not apply to cryptocurrency. Therefore, you could sell a cryptocurrency at a loss and then immediately repurchase it that same day while still being able to use that captured loss against other gains or income.

Consider Tax-Gain Harvesting

If your income is relatively lower this year compared to others (think: sabbatical, time between jobs, back in school, etc.), and you’ve moved down to a lower long-term capital gains tax bracket, then you may have a nice opportunity to sell appreciated taxable investments and pay taxes at a lower rate.

Did you know? In 2025, if your income is under $48,350 (single) or $96,700 (MFJ), you are in the 0% long-term capital gains tax bracket. Meaning you’d have the chance to sell some investments with a gain at a 0% tax rate!

2025 Long-Term Capital Gains Brackets

Single Filers
- 0%: ≤ $48,350
- 15%: $48,351 – $533,400
- 20%: > $533,400
Married Filing Jointly
- 0%: ≤ $96,700
- 15%: $96,701 – $600,050
- 20%: > $600,050

Assess the Potential for Roth Conversions

Do you have money in a pre-tax retirement account that you’d like to move over to a Roth? If so, there are a couple of times where doing so can make even more sense from a tax standpoint:

When you’re in a relatively lower-income year
When the stock market is down

Here’s another case where a lower-income year may bring some opportunity. In this case, you’ll want to focus on your ordinary income tax bracket, since this is what’s applied to any amounts converted from a pre-tax retirement account to a Roth. If you do find yourself in this position, you could consider taking advantage of any room left in that relatively lower tax bracket to pay less taxes on the conversion than you would in more “typical” years.

And if the stock market is down, resulting in a lower balance in the account, there’s simply less income produced in the process of converting, compared to when the account balance is higher. In other words, it makes the tax on the conversion cheaper.

If you plan on executing a Roth conversion, make sure you have the cash on hand to pay the tax bill.

Maximize Your Charitable Donation Strategy

If charitable giving is part of your routine, then it pays to examine your strategy through a tax lens as we near year’s end, especially in 2025. In particular, the passage of the OBBBA over the summer came with a handful of specific updates impacting how you should think about charitable donations. Let’s look at each here:

The standard deduction for this tax year is $15,750 (single) and $31,500 (MFJ).

Therefore, your total itemized deductions (which can include donations to charity) would need to exceed those levels in order for itemizing to save on taxes.
If your typical single-year donation amount doesn’t move the needle on your total itemized deductions above the standard amount, then “bunching” might be worth exploring. This involves combining the amount you would normally donate across multiple years into a single one.

The cap for the state and local tax (SALT) deduction was raised from $10,000 to $40,000 (though it phases out for those with a MAGI of $500k and goes back down to $10k when MAGI hits $600k).

So for those with higher state and local taxes, that can much more easily push you into itemizing territory when adding in charitable contributions.

Beginning in 2026, you’ll only be able to deduct contributions that surpass 0.5% of your Adjusted Gross Income (AGI).

This means the same contribution will count for less on your taxes in 2026 than it will this year.
This is another reason for some filers to consider the “bunching” approach mentioned above. More specifically, moving what you’d normally donate in 2026 forward into 2025 and combining it with this year’s annual giving could easily produce a better tax outcome.

Also starting in 2026, itemized deductions will be capped at 35% for those in the 37% marginal bracket.

Therefore, charitable donations will be slightly less impactful from a tax standpoint for those in the top bracket after this year.
Yet another reason for those in the highest bracket to bunch into 2025.

For those who don’t itemize, starting in 2026, you will be able to deduct up to $1k (single) and $2k (MFJ) for donations directly to charity.

If your typical donation amount doesn’t move the needle with itemizing over taking the standard deduction, and you haven’t yet completed your giving for 2025, consider delaying to January.
If you don’t itemize, you can take a deduction in 2026 that you wouldn’t get this year.

Lastly, here’s a general refresher on how to make the most of charitable donations, including the details on donating appreciated investments to a donor-advised fund, another fantastic tax-planning move!

Year-End Tax Planning FAQ

Q1: Why is tax planning so important at the end of the year?

The end of the calendar year is when you have the most complete picture of your income, deductions, credits, investment performance, and so on. You should also have a general idea of what those same variables will look like in the coming year for comparison. This allows you to make the most tax-informed decisions within your financial plan.

Q2: What is year-end tax planning?

Year-end tax planning is the process of running projections and making adjustments before December 31st to reduce your current tax bill and avoid surprises at filing time.

Q3: Which accounts have a funding deadline of December 31st?

Any “employee” contributions to workplace retirement plans, such as 401ks and 403bs. Additionally, payroll deductions made to HSAs only count for the current year when made by 12/31 (though direct contributions can be made up until the tax filing deadline with FICA taxes owed on these amounts).

Q4: How do I avoid an IRS underpayment penalty?

You can avoid an underpayment penalty by meeting the IRS “safe harbor rule”, which can be done by paying at least 90% of your total current year tax liability, or at least 100% of the tax owed for the previous year. This jumps to 110% of the prior year’s tax bill if your AGI was over $150k (over $75k if married filing separately).

Q5: Is tax-loss harvesting worth it if I don’t have gains to offset?

Yes. If you don’t have capital gains, you can use up to $3,000 of investment losses each year to reduce ordinary income, with “unused” losses carried forward for use in future years.

Q6: When does a Roth conversion make sense?

Roth conversions often make the most sense in lower-income years or during market downturns, when the tax cost of converting those pre-tax dollars is relatively lower than it may be in other years (as long as you have the cash to pay the taxes).

Eddy Jurgielewicz, CFP® is a Partner and Lead Financial Planner at Upbeat Wealth, a fee-only firm based in New Orleans and serving clients virtually across the country. He specializes in providing straightforward financial guidance to ambitious young families as they navigate life’s many milestones.

Do you have questions about what we shared in this post, or anything else in general? Feel free to schedule a free consultation or drop us a line!

Disclaimer: All content in this article is provided for educational, general information, and illustration purposes only. None of the information is intended as investment, tax, accounting, or legal advice. Nor is it a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult with a financial planner, accountant, and/or legal professional for advice on your specific situation. Read our full disclaimer here.

Boost Your Charitable Giving Strategy

Give Your Charitable Giving Strategy a Boost

Are you planning on donating to a charitable organization this year?

If so, you may be able to take advantage of some helpful tax strategies – in addition to supporting your desired cause.

So You Want to Give to Charity… What Gives?

At Upbeat Wealth, we love working with households that prioritize giving. Many families we serve are eager to put some of their resources into action for the community. This, alone, is awesome. Goals like this excite us as planners and motivate us to do what we do. So before we move on, I want to be clear that the way we view it, the primary goal of giving should be to provide those resources to an effort that’s important to you. The benefit is in doing good. Full stop.

Now, there is a potential secondary benefit to charitable giving, which we’ll discuss here. It’s an afterthought—a cherry on top—but not the leading reason we believe people should make donations. As with many things in our world, it has to do with… taxes!

The IRS’ Gift to You

The added available benefit (secondary to lending that neighborly hand to those in need) comes in the form of a tax deduction.

Bear in mind that a tax deduction is something that reduces the portion of your income which is subject to tax. The idea here is that it then reduces the amount of taxes you would pay for the year. This is different from a tax credit.

By giving money to a charity, the IRS lets you take a deduction against your income for the value of what you give in that tax year, up to a certain limit.

A very important qualifying detail here is that this advantageous deductibility factor only really enters the conversation if it will help you itemize at a level over the standard deduction threshold (whether alone or combined with other itemized deductions). The standard deduction in 2025 is $15,750 for individuals and $31,500 for those filing MFJ. So, as an example… If you’re a married couple who is making charitable contributions this year and this helps get your itemized deductions above $31,500, then you’re probably in a spot to capture this extra tax perk.

A couple rules

Currently, if you give cash, you’re able to deduct your gift amount up to 60% of your AGI for the year. If you donate an investment, that limit is 30% of AGI.
Additionally, you need to make sure the organization qualifies for tax-deductible charitable contributions. It must be a US-based 501(c)(3). The IRS provides a tool for checking this.

But Wait, There’s More!

Of all the ways one can donate, cash and invested securities are the two most common methods we see. A “cash” contribution is your classic check written to the name of the organization or maybe you enter your credit card information on their website. Alternatively, someone can choose to donate an investment they own – such as stocks, mutual funds, or ETFs.

If your charitable giving goal is enough to allow for a beneficial deduction, then we’ll want to consider some further possible tax strategies (that’s right, there’s more!) – one of those being whether it makes more sense to give investment assets instead of cash.

Give Your Giving a Bigger Boost

Now here’s the kicker for donating that investment… When you do so, you are not selling the investment yourself. You give it away and then the nonprofit sells it. Therefore, you don’t have to worry about paying any taxes on the gains. Under normal circumstances, you have to pay “long-term capital gains” taxes on the growth of an investment when you sell it (assuming it was held for over 1 year). For many people we work with, the tax rate is either 15% or 20%. Because of this, you’re increasing your gift vs. selling the stock and donating the after-tax proceeds.

Additionally, you’re able to take a tax deduction for the full fair market value of the asset on the day that you donate it (up to an annual limit of 30% of your AGI). Let’s take a closer look at this with an example…

An Example

When Naomi was 23 years old, she inherited a taxable account from her grandfather consisting of a single stock. Her cost basis upon receiving the stock was $1,000 (the fair market value at that time). She’s now 33 years old and still owns the stock, which has jumped in value to $20,000.

Naomi is single, earning an income of $300,000. She’s in the 35% federal tax bracket and has a 15% rate for long-term capital gains + is subject to the 3.8% net investment income tax. She has also decided to begin donating $20,000/year to her favorite local nonprofit, which she could comfortably do from cash flow if she wanted.

She wants to determine the most optimal way to make her donation this year.

naomi checks the key boxes for us to consider some enhanced tax strategies...

☑️ She plans to donate to a qualified 501(c)(3c).

☑️ Her intended giving level will get her to an itemized deduction amount ($20,000) that is more than what her standard deduction would be ($15,750).

☑️ She has a “long-term” asset in a taxable account.

☑️ The investment has appreciated in value.

As such, we’ll want to explore the opportunity of donating her stock instead of cash.

it makes a lot of sense to donate her stock to the nonprofit instead of cash

In doing so…

She provides the intended level of financial support to charity.
She avoids paying capital gains taxes on the stock that she donates.
She won’t have to worry about dealing with capital gains taxes on this investment at some point in the future (which she may have to if she continues to hold onto it).
She can take a $20,000 itemized deduction for the gift on her taxes (the full fair market value of the stock on the date she donated it).
Since she already has the free cash flow available, she can then use that money to buy into a diversified investment portfolio that helps support her greater financial plan – essentially replacing the investment value of the donated stock. This new investment will have a substantially higher cost basis than the gifted stock ($20,000 vs. $1,000) – which can help reduce potential capital gains taxes down the road.

Donating the stock is the ONLY strategy that allows her to be certain of paying $0 in taxes on the disposition of the stock and get a full $20,000 deduction in the current year.

Some Common Situations Where This Can Make a Lot of Sense…

Other examples of scenarios in which you may find yourself with a similar opportunity include:

You purchased an investment yourself several years ago. It’s been sitting around but doesn’t entirely fit in with your current investment strategy.
You have accumulated vested RSUs or exercised stock options that haven’t been sold yet.
Someone gifted you stock, or another investment in the past.
A parent or other family member opened and funded a custodial account (UTMA/UGMA) for you when you were younger. You’re now the full legal owner of the account several years later.
You are overly concentrated with a certain investment inside of your taxable portfolio.
You have an old mutual fund with relatively high expenses.
Maybe you just have some nice gains in your diversified portfolio and want to take them off the table in a tax-efficient way.

So You’ll Donate Investments – But How Do You Even Do the Thing?

Directly to the organization...

In some cases, you may be able to arrange to send your stock or other investments directly from the custodian that holds your account. Not all charitable organizations are set up to receive your stock, mutual fund, or other investment. So you’ll want to check that first. If they are, it will involve some paperwork and coordination between them and your investment custodian.

donor-advised fund...

The Donor-Advised Fund presents a flexible way to facilitate your giving strategy. It is a type of investment account that is facilitated by a 501(c)(3) public charity – you will recognize them as independent flavors of major custodians, such as…

… to name a few. When you contribute cash or investments to a DAF, you are literally giving money to a charitable organization at that point, thus allowing you to take a deduction for the DAF contribution in that tax year. However, you’re able to manage the assets inside the DAF as you see fit. This gives you the chance to grow your eventual impact even further. Additionally, you’re not taxed on any gains inside the account. Be aware that – if your investments do increase – that doesn’t impact your tax deductibility. The tax deduction is simply based on the value of what you put into the DAF on the date you do so. Then, you can choose to make grants from the DAF to your organization(s) of choice at any point down the road. These grants don’t need to occur in the same year you contributed to the DAF.

you might consider a donor-advised fund if:

Your organization(s) of choice do not readily accept direct gifts of invested assets. If you donate the asset to the DAF, you can take a deduction for the full FMV on the date of the contribution. Then, the DAF can sell the investment (no tax impact on you) and send a check to your selected charity.
You’re ready to take the tax deduction but want to give the cash/investment more opportunity for growth before ultimately granting it to the designated organization.
You want greater flexibility on when and how you distribute grants.
You want to streamline a bigger-picture philanthropic strategy.

Things to be aware of with donor-advised funds:

Some have minimum initial contribution requirements
They may have a minimum grant amount
They are likely to have administrative fees (0.6% is typical)

If You Plan to Donate an Investment, Avoid Doing The Following

Donating an investment that has lost value.
- It’s better to sell the investment first, take the deduction for the capital loss, and then donate the cash to charity.
Donating an appreciated investment you’ve held for a year or less.
- It’s possible to donate an investment you’ve held for a year or less (at a “short-term capital gain”), but you’re not able to take a tax deduction for the full FMV. Instead, you can only deduct the cost basis (what you paid) minus what you would have owed in taxes for the gain on the investment.
- Remember that donating an appreciated long-term asset allows you to deduct the full FMV at the time of the gift.

Ask Yourself These Questions to Determine if Donating an Investment is Worth Exploring

1. Are you already donating to charity, or are you planning to do so this year?
2. Do you have any long-term (held longer than 1 year) investments in a taxable account?
3. Have those investments appreciated in value?
4. Will your charitable contributions plus other deductions put you in a place to itemize over the standard deduction?
5. Extra Credit: Do you have the available cash flow to replace the investment(s) donated from your brokerage account?
  - This one is not necessarily a must but can be a nice element.
  - It could be in the form of monthly cash flow, bonus pay, vesting RSUs, etc.

If you answer “yes” to at least #s 1-4, it’s worth looking into how this strategy fits into your greater plan.

Do you have questions about what we shared in this post, or anything else in general? Feel free to schedule a free consultation or drop us a line!

Disclaimer: All content in this article is provided for educational, general information, and illustration purposes only. None of the information is intended as investment, tax, accounting, or legal advice. Nor is it a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult with a financial planner, accountant, and/or legal professional for advice on your specific situation. Read our full disclaimer here.

Charitable Giving Donor-Advised Fund Tax Strategies