Taxes matter, sadly, all year long. With this said, there are a handful of tax related items that matter more heavily at the very beginning of the year (read: important to “action” as early as possible in the new year).
Consider:
- Adjusting or increasing 401k/403b contributions up to the applicable max amounts. Last week’s TGIF 2 Minutes editions summarized these amounts. Those in the 60-63 age range have a “super catch-up” contribution available.
- Remember how important it can be tax-wise longer-term to use the ROTH 401k/403b for all or a portion of these contributions — there are NO income limits on Roth 401k contributions.
- If needing to sell appreciated stock holdings to generate cash — and the account type allows it — recognize taxable gains early in the year and ask your adviser to manage any available “offsetting tax losses” over the remainder of the year. Please ask me — and your CPA — more about this item.
- With regards to the 2025 tax filing season, there is still one vehicle remaining that can affect taxable income from 2025 — in a small but helpful way: IRA contributions. These contributions for 2025 can be made all the way up until April 15, 2026. (Unless the vehicle is a SEP IRA for self-employed people — AND — you file for an extension; SEP contributions on extension for 2025 can be made all the way up until October 15, 2026.)
- For those newly retired (yeah!) or newly enrolled in social security (yeah!) — remember to adjust tax withholding rates on various account distributions or new pensions. Also — tax withholding on social security is not “automatic”. Make sure that a withholding rate has been elected to avoid a possible surprise tax payment next April.
In the meantime, if acted upon early in the year, these items can make a more meaningful impact on minimizing taxes.
*Consult with a tax professional on ALL tax matters and tax planning. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.