Now is the time for year-end financial planning 

With year-end drawing closer, investors want to ensure they have implemented strategies that will help enhance their wealth and mitigate their taxes. While there are many potential ways to achieve these objectives, it is important to evaluate each strategy as it relates to your specific situation.

A clear understanding of your financial situation is important for identifying strategies that best align with your goals. Having a financial plan framework provides structure, clarity and confidence in making monetary decisions. It helps you choose the right approach based on your goals, time horizon and risk tolerance. Because many of these strategies are multifaceted, it requires one to consider elements of cash flow, taxes, estate planning and investments. Below are items to consider for your end of year financial planning checklist.

• Roth conversion: A Roth conversion is the process of transferring pre-tax retirement funds into a Roth account. You pay income tax on the amount converted in the year of conversion, but once in a Roth, the money grows tax-free and qualified withdrawals are tax-free. A conversion must be completed by year-end and since you have most of the year’s tax information, now is the time to do some projections to see if paying the tax and converting IRA dollars to Roth IRA makes sense. 
• Charitable giving: Sometimes we give solely for the cause, sometimes we also get a taxable benefit. 

A donor advised fund (DAF) is a vehicle that allows individuals to make a charitable contribution, receive an immediate tax deduction and then make grants from the fund over time.   

Qualified charitable distributions allow individuals aged 70.5 or older to donate directly from their IRA to a qualified charity, and it can count towards their required minimum distribution (RMD) without increasing taxable income. 

• Gifting: You can give $19,000 per year to anyone you choose in 2025.  
• Tax-loss harvesting: Review your investments and see if there is something you can sell for a loss to use against gains you have already or will recognize in the future. 

Direct indexing with tax-loss overlay is a customized strategy that allows investors to replicate the performance of a broad-market index by owning individual stocks, while the quantitative overlay identifies tax lots at a loss, sells those lots to realize losses and subsequently reinvests the proceeds into an alternative security.   

• Tax-gain harvesting: Sometimes it makes sense to realize capital gains from your investments if you have losses or if your income was low enough this year, you may not have to pay capital gains tax. 
• Mutual funds gain distributions side-step: Mutual funds distribute capital gains at the end of most years, whether the fund gained or lost money. It may make sense to get out of a mutual fund that is expecting a large capital gain distribution. 
• Retirement plan contributions: If you intend to max out your 401(k) or other retirement plan, now is the time. It might be a good idea to take full advantage of the match if you can!
• HSA contribution: If you have a high-deductible health insurance plan, you may want to contribute to your HSA to make it worthwhile. 
• 529 account funding: Annual exclusion rules apply to 529 account(s), so be sure to contribute for this year if you planned to. Also, there is an opportunity to fund a five-year annual exclusion contribution to the account if you want to accelerate your annual exclusion gifting. 
• Required minimum distributions (RMD): Don’t forget to take your RMD from all your IRA or inherited-IRA accounts.
• State pass-through entity (PTE) tax: If you are involved in a partnership or S corporation, you may be able to have the PTE pay taxes on your behalf that would otherwise go unclaimed because of the $10,000 limitation. 
• Incentive stock option (ISO) and nonqualified stock option (NQSO) exercise: If you have room in a tax bracket or before you trigger alternative minimum tax (AMT), it might be worthwhile to exercise some options. 
• ISO disqualification: If you exercised ISO earlier in the year and the stock has since gone down, it may make sense to disqualify your ISOs and pay ordinary income tax rather than AMT.
• Wills and estate documents: A good plan of action is to review and refresh your wills and estate documents every five years. If it has been several years since last check, now may be the time to schedule your meeting to go over them.  

Strategic decisions should be made in the context of your overall financial picture. Working with an advisor who has a comprehensive understanding of your finances, and your objectives, is advantageous because elements of these strategies can change annually, be impacted by new legislation or differ by state, which is critical to know for proper implementation.   

Questions? Connect with our team if you would like to discuss your specific situation.

This information does not constitute investment advice and is not an offer to buy or sell a security. The material is provided for general information and educational purposes and is based on information provided to us by sources deemed to be reliable. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. Past performance is no guarantee of future results and asset values will fluctuate with changing market conditions. There is no guarantee that the views and opinions expressed in this document will come to pass. Investing in the market involves gains and losses and may not be suitable for all investors. All investments are uninsured and can lose value. AI (artificial intelligence) was utilized to assist in the creation of this marketing piece.

Baker Tilly Wealth Management, LLC (BTWM) is a registered investment advisor. Reference to registration does not imply any particular level of skill. BTWM does not provide tax or legal advice. BTWM is not an attorney. Estate planning can involve a complex web of tax rules and regulations. Consider consulting a tax or legal professional about your particular circumstances before implementing any tax or legal strategy. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought.

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