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Every December, people scramble to finish holiday shopping, travel plans, and year-end tasks. But one of the most important deadlines — your December 31st tax deadline — often gets overlooked until it’s too late. And once the calendar flips to January 1st, many of the smartest tax moves disappear.
In this episode of Retire Today, I walk through seven year-end tax steps you should consider to make sure April brings fewer surprises and more savings. With new tax laws taking effect, the stock market sitting near all-time highs, and contribution limits shifting in the coming years, this is the perfect moment to take control of your finances.
1. Manage Your Tax Bracket Before the Year Ends
Your income may fluctuate from year to year — especially in retirement. Some retirees have unusually high-income years due to bonuses, pension payouts, early retirement packages, stock vesting, or unexpected distributions. Others have abnormally low-income years.
If you’re experiencing a higher income year, now is the time to pull deductions forward. Charitable giving, donor-advised fund contributions, and other deductible expenses can help lower your taxable income.
If you’re in a lower income year, you might choose to accelerate income instead — such as doing a Roth conversion or taking extra withdrawals at a better tax rate.
Year-end planning starts with projecting your tax return and understanding which direction to go.
2. Harvest Capital Losses — and Sometimes Gains
Even in years when the market is high overall, you may still have individual positions sitting at a loss. Harvesting those losses can offset gains or reduce taxes now or in the future.
On the flip side, some retirees find themselves in the 0% long-term capital gains bracket, which creates the perfect opportunity to harvest capital gains on purpose. When you’re in a low tax bracket and gains cost nothing, you can reset your cost basis without additional tax.
This is one of the most underused year-end strategies — especially when markets have been climbing.
3. Review Mutual Fund Capital Gain Distributions
Many mutual funds issue their capital gain distributions in December. You may not receive the money in cash, but it still counts as taxable income.
Look up the estimated year-end distributions from your fund companies and double-check your brokerage account. Mutual fund distributions have surprised many retirees — and they can lead to unnecessary underpayment penalties if tax withholding isn’t adjusted in time.
4. Get Your Tax Withholding Correct
Years ago, tax underpayment penalties weren’t a big deal. But with high interest rates today, penalties now operate more like expensive interest charges for not paying taxes in the proper quarterly schedule.
If you expect to owe money for 2025, you may want to adjust withholding from your paycheck, pension, Social Security, or IRA distributions. For retirees over 59½, using IRA withholding is one of the easiest ways to catch up — and it is treated as if it was paid evenly all year.
To avoid penalties, don’t wait until spring. Make corrections before December 31st.
5. Use Qualified Charitable Distributions (QCDs)
If you’re age 70½ or older, QCDs allow you to donate directly from your traditional IRA to charity tax-free. This is often better than taking withdrawals and giving afterward — especially if you use the standard deduction.
Even if you’re not yet required to take RMDs, QCDs can reduce your future RMD burden and help you give in a more tax-efficient way. With 2025 bringing updated QCD limits and ongoing rule changes, it’s smart to review your giving strategy now.
6. Make Annual Exclusion Gifts Before Year-End
In 2025, the annual exclusion gift limit is $19,000 per person — and it remains the same for 2026. If you’re planning to help your children or grandchildren, consider spreading the gifts across the end of this year and the beginning of next year to maximize tax-free amounts.
For education planning, 529 plans also allow “superfunding,” letting you front-load up to five years’ worth of gifts. Year-end is an ideal time to execute these strategies thoughtfully.
7. Rebalance Your Investments (Especially After a Big Market Year)
When markets rise sharply, your portfolio may drift into a risk level you never intended. A portfolio that started at 60% stocks may now sit at 68% or higher. That’s more risk than you signed up for — especially if you are nearing retirement.
Rebalancing is a critical part of your year-end checklist. It brings your risk back in line, prepares your portfolio for the next year, and supports the long-term stability of your retirement plan.
The Bottom Line
Year-end planning isn’t just about taxes — it’s about taking control. Whether it’s adjusting your income, harvesting gains or losses, fixing withholding, giving strategically, gifting to family, or rebalancing your investments, December is your opportunity to make meaningful changes before the window closes.
Don’t let the deadline sneak up on you. Start now so April feels predictable — not painful.
Related: Maximize Your Social Security—Without Waiting Until 70