Jun 19, 2025 | Liability Freedom
Year-Round Tax Planning: 7 Smart Strategies to Keep More of Your Income
Tax planning isn’t just a task for April. Managing your taxes strategically throughout the year can result in significant savings, less stress at filing time, and improved financial outcomes. From adjusting withholdings to optimizing investments, here are seven essential year-round tax planning strategies that can help you take control of your financial future.
1. Review Your Withholdings Early in the Year
Start the new tax year by ensuring your paycheck withholdings align with your tax goals. An incorrectly filled W-4 can result in surprises at tax time — either owing money or receiving a larger refund than expected.
What you can do:
- Use the IRS Tax Withholding Estimator to see if your current withholdings are appropriate.
- Adjust your W-4 through your employer if necessary.
- Don’t forget to verify state tax withholdings if applicable.
2. Contribute to Tax-Advantaged Accounts Regularly
Reducing your taxable income is a powerful way to cut down on taxes owed. Making consistent contributions to eligible accounts can both reduce your current tax liability and help secure your financial future.
Consider contributing to:
- 401(k), 403(b), and Traditional IRAs (tax-deferred growth).
- Roth IRAs (tax-free withdrawals in retirement).
- 529 Plans for educational savings (tax-free growth and withdrawals).
- Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) for healthcare and dependent care.
Note: While 401(k) contributions must be made by December 31, IRA and HSA contributions can continue until the tax filing deadline in April.
3. Explore Roth IRA Conversions Before Year-End
Converting funds from a traditional IRA or 401(k) to a Roth IRA can be a savvy long-term tax move. While the conversion is taxable in the year it occurs, it allows for tax-free withdrawals in retirement.
Key points:
- Roth conversions can increase your taxable income for the year.
- To minimize impact, consider partial conversions up to the top of your current tax bracket.
- This strategy offers flexibility in future retirement withdrawals.
Talk with a tax advisor to determine whether a Roth conversion aligns with your goals.
4. Meet Required Minimum Distribution (RMD) Deadlines
If you’re 73 or older (as of 2024), you’re required to start taking RMDs from traditional IRAs and most retirement plans. Failing to take your RMD by December 31 may trigger hefty penalties.
Want to give back instead? Consider a Qualified Charitable Distribution (QCD) to donate your RMD directly to a charity. QCDs don’t count toward your taxable income but aren’t deductible as charitable contributions.
- QCD limit for 2024: $105,000.
- Eligibility starts: Age 70½.
5. Manage Capital Gains Tax with Smart Investment Strategies
Selling investments at a profit triggers capital gains tax. But with careful planning, you can reduce or even eliminate that burden.
Tactics to consider:
- Split large sales across tax years to avoid bumping into a higher bracket.
- Gift appreciated securities to charitable organizations.
- Use tax-loss harvesting to offset gains with losses.
- Invest in Opportunity Zones for potential tax deferral or reduction.
These moves are best discussed with a tax or financial advisor to ensure they fit your broader investment strategy.
6. “Bunch” Itemized Deductions for Greater Impact
If your deductible expenses are close to or just under the standard deduction limit, bunching them into a single year may allow you to itemize — and claim a higher deduction.
Common itemized deductions include:
- Mortgage interest
- Medical and dental expenses
- State and local taxes
- Charitable contributions
Example: If your medical expenses are at 5% of your AGI this year but could hit 7.5% next year with some delayed procedures, it may be worth deferring them to qualify for the medical expense deduction.
This technique works particularly well for charitable donations and medical bills you can schedule in advance.
7. Maximize Tax-Free Gifts by Year-End
Gifting is not only generous — it’s tax-savvy. Under the annual gift tax exclusion, you can give a certain amount per person, per year, without triggering gift taxes or affecting your lifetime estate tax exemption.
Annual gift tax exclusion for 2024:
- $18,000 per person
- $36,000 for married couples filing jointly
Gifts above this threshold reduce your lifetime estate exemption, which currently stands at:
- $13.61 million per individual
- $27.22 million per couple
Note: These exemption limits are set to decrease significantly after 2025 unless Congress takes action. Planning gifts now can help preserve more of your estate long-term.
Collaborate with a Financial Professional
Tax planning isn’t just about crunching numbers — it’s about integrating taxes with your overall financial strategy. A financial advisor can:
- Help you forecast future tax implications.
- Coordinate with your CPA for efficient tax execution.
- Customize strategies for investments, charitable giving, retirement, and estate planning.
Final Thoughts
Effective tax planning is proactive, not reactive. By checking in with your finances periodically and applying these strategies year-round, you can reduce tax surprises and support your long-term financial well-being.
Whether you’re working toward retirement, growing your wealth, or planning your legacy, thoughtful tax strategies are key to making your money work smarter — not just harder.