As the year winds down, it’s the perfect time to take inventory of your financial picture and make strategic decisions to minimize your tax burden. It also makes a lot of sense to put a bow on the hard work you’ve put in throughout the year. Year-end tax planning isn’t just about saving money in the short term – it’s about aligning your financial actions with your long-term goals while making the most of the tools available to you (hence, our Purpose Built Planning process). Whether it’s leveraging charitable giving, taking advantage of lower tax rates on long-term capital gains, or planning around required minimum distributions (RMDs), there are meaningful ways to lower your effective tax rate and keep more of your wealth working for you.
For example, let’s say your adjusted gross income (AGI) places you squarely in the 24% tax bracket. With the right strategy and individual goals, you could lower your effective tax rate to as little as 7% (side note: we are in the process of executing this exact instance for a client). Charitable giving is a powerful tool here. By making significant contributions – whether outright gifts of cash or appreciated assets – you can create substantial deductions that reduce your taxable income. Pair this with the benefits of long-term capital gains rates, which are often significantly lower than ordinary income tax rates, and you can further ease your tax burden. Selling appreciated assets you’ve held for over a year allows you to take advantage of these lower rates, helping you generate liquidity for future goals without triggering a hefty tax bill. For those over 73, RMDs add another layer of complexity and opportunity. If you don’t need the income and you’re charitable, consider a qualified charitable distribution (QCD), which satisfies your RMD requirement while excluding the amount donated from your taxable income (a win-win).
Benefit election season is another critical component of effective tax planning, though it’s often overlooked in the rush of year-end tasks. Choices like maximizing your contributions to tax-advantaged accounts – such as 401(k)s, HSAs, or FSAs – can reduce your taxable income now while building savings for the future. Opting into or adjusting these benefits is an opportunity to keep your finances in sync with your goals, and these decisions deserve the same care and attention as any other part of your tax strategy.
Tax planning isn’t a one-size-fits-all exercise. It requires a deep understanding of your financial picture, your goals, and the opportunities available to you. By being purposeful about how you allocate resources, you can make a meaningful difference in your financial outcome – not just this year, but for years to come. At LeConte Wealth, we pride ourselves on providing personalized advice tailored to your unique circumstances.
If you’re ready to take control of your financial future and make each year count, our team is here to help. Let’s work together to craft a Purpose Built strategy that works as hard as you do.
P.S. The IRS has recently released tax inflation adjustments for tax year 2025, which could impact your long-term planning. You can view the details on their website here.
