With the holiday season upon us, it is a good time to take stock of your overall financial picture and consider strategies that may help you prepare for the year ahead. The passage of the One Big Beautiful Act (OBBBA) in July 2025 introduced several tax-law changes that may affect individuals, families and business owners. Therefore, it is prudent to review your financial plan before year-end so that you can be confident that you have capitalized on potential opportunities, that your planning is aligned with current regulations and that you are well-positioned as you enter 2026.
Required Minimum Distributions (RMD)
If you are 73 or older, you must take your RMD from tax-deferred retirement accounts by December 31, 2025 to avoid penalty. If you turned 73 during 2025, you may delay taking your 2025 RMD until 4/1/2026, but keep in mind, that doing so will mean that you have to take two RMDs next year, which may increase your taxable income for 2026.
If you are a beneficiary of an Inherited IRA, it is likely that you will have minimum distribution requirements as well. The rules are complex, but being sure that you satisfy the requirements is of paramount importance as failing to do so can be a costly mistake. To learn more about Inherited IRA Distribution Requirements, click here: https://www.core-wm.com/2024/09/30/understanding-the-new-inherited-ira-distribution-requirements/.
If you are age 70 ½ or older, you can choose to make charitable gifts up to $108,000 in 2025 to a qualified charities directly from your IRA. These charitable gifts, called Qualified Charitable Distributions (QCDs), will count towards your annual RMD requirement and will be excluded from taxable income. Keep in mind that gifts to Donor Advised Funds do not qualify as a QCD.
Savings Opportunities and Contribution Deadlines
Employer-Sponsored Retirement Plans: For 2025, seek to maximize contributions subject to IRS limits, if you are able. If your employer offers a matching contribution, at a minimum, seek to contribute enough to benefit from the full match. Both current and future tax brackets should be considered to determine if contributions should be made on a tax-deferred or ROTH basis.
IRAs/Roth IRAs: If you are eligible, consider making contributions to an IRA or Roth IRA for 2025. Contributions for 2025 can be made up until 4/15/2026. It is important to be mindful of income limitations as higher incomes may limit your ability to make deductible contributions.
Self-Employed/Small Business Retirement Plans (SEP IRAs and Solo 401(k)s): For Solo 401(k)s, employee deferrals must be “elected” or included in payroll by 12/31/2025. However, employer contributions for both Solo 401(k) plans and SEP IRAs can be determined and made up until the tax filing deadline, including extensions.
Health Savings Accounts (HSAs): For those that are eligible, contributions for 2025 can be made up until 4/15/2026. Health Savings Accounts allow for tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. Balances in HSAs do NOT need to be depleted by year-end; they carry over from year to year.
Flexible Savings Accounts (FSAs)
Review remaining FSA balances for 2025 and keep in mind that these balances typically need to be used up by year-end. Some plans do allow for a carryover or grace period, but unused funds may be forfeited.
Maximum contribution amounts for tax-advantaged savings accounts can be found here: https://www.core-wm.com/2024/12/02/2024-2025-contribution-limits-for-retirement-accounts/
Roth Conversions and Withdrawal Strategy
Rather than simply focusing on minimizing taxes in 2025, it is prudent to seek to manage income levels and related tax obligations over time. This may mean proactively choosing to recognize more income than is necessary in one year in efforts to reduce your tax liability in future years.
For example, for those with significant tax-deferred balances that will eventually be subject to RMDs, you could choose to voluntarily take distributions before RMDs begin or to convert a portion of those assets to Roth. Doing so may help you (1) manage when and how taxable income is recognized, (2) potentially take advantage of current tax rates, (3) maintain more predictable income levels, which can help manage Medicare premiums and (4) reduce the size of future required distributions.
Charitable Gifting Strategies
If you itemize, charitable giving can be a powerful tool. While cash gifts are always an option (deductible up to 60% of AGI cap), gifting appreciated stock (deductible up to 30% of AGI cap) allows the donor to avoid capital gains recognition while getting the full fair market value of the deduction while also allowing the recipient to benefit from the full market value of the gift.
Beginning in 2026, non-itemizers will have a limited deduction for cash contributions and deductions for itemizers will be more limited. Therefore, for those with high income in 2025, it could be prudent to accelerate charitable gifts into 2025.
Tax-Loss Harvesting
While market performance has been strong this year, if you have unrealized losses in your portfolio, those losses can be realized (sold) to offset gains realized in 2025 or to be carried forward into future years. Up to $3,000 of excess losses can be used to offset ordinary income in 2025.
If you have capital loss carryforwards from prior years and your portfolio needs to be rebalanced to maintain the integrity of your investment plan and asset allocation, you can use those losses to offset gains which will help to minimize the tax impact of any necessary repositioning.
Estate Plan Review and Gifting
It is prudent to review your estate plan, your beneficiary designations and how your accounts are titled on an annual basis. Powers of attorney and wills should also be reviewed to be sure they are consistent with your wishes.
For those interested in gifting, under the annual gift tax exclusion, you can gift up to $19,000 per person to as many people as you wish in 2025. Gifts in excess of this amount will need to be reported on Form 709 in conjunction with filing your individual tax return. Please note that even if a gift tax return is required, the gift does not trigger a tax liability for the giver or the recipient.
Preparing for 2026
Confirm you have health insurance coverage in place for 2026. In most cases, premiums have increased, potentially significantly. Be sure you have adjusted your spending and cash flow planning to reflect these higher out of pocket expenses.
Employer benefits: If you are eligible for benefits from your employer, be sure you modify retirement plan, HSA and FSA salary deferrals as appropriate, considering IRS-inflation adjusted limits. You should also review and select attractive cafeteria plan options; these may include opportunities to purchase life insurance and disability coverage, among others.
Conclusion
As we approach the end of 2025, there are many moving parts to consider and taking a comprehensive, holistic view is critical. The One Big Beautiful Bill Act contains potentially material implications for taxpayers. With the new additional and expanded deductions and the fact that the current tax brackets are now permanent, the timing of tax-sensitive decisions, like conversions, distributions and charitable giving, becomes even more relevant. At Core Wealth Management, we seek to design tailored strategies and provide coordinated guidance so that you can maximize opportunities and avoid common pitfalls. We’re here to help you review your unique situation, identify year-end actions and position you for a strong 2026.