Tax Planning Considerations Before Year-End
As the year winds down, it’s important to review your finances and consider strategies that can help you reduce taxes, support your long-term goals, and make the most of current opportunities. Four areas that are worth taking a closer look at before December 31st include: Qualified Charitable Distributions, Net Unrealized Appreciation, Roth Conversions, and Donor-Advised Funds.
Qualified Charitable Distributions (QCDs)
A Qualified Charitable Distribution allows individuals age 70½ or older to give directly from their IRA to a qualified charity. Instead of withdrawing money from your IRA, paying tax on it, and then donating, the distribution goes straight to the charity. This keeps the withdrawal out of your taxable income while still fulfilling your charitable intentions. For those over age 73 who must take Required Minimum Distributions (RMDs), a QCD can also count toward that requirement, helping you meet your RMD while avoiding extra taxable income.
Net Unrealized Appreciation (NUA)
If you own company stock inside your employer’s retirement plan, Net Unrealized Appreciation may be a strategy to consider when it’s time to take a distribution. Normally, when you withdraw from a retirement account, the entire amount is taxed as ordinary income. With NUA, you can move the company stock into a taxable brokerage account and only pay ordinary income tax on the stock’s original cost basis. The growth (or the “unrealized appreciation”) is then taxed at long-term capital gains rates when you sell— often a lower rate than ordinary income tax. This approach can make a big difference for employees with significant company stock built up over time.
Roth Conversions
A Roth conversion means moving money from a Traditional IRA or 401(k) into a Roth IRA. When you convert, you’ll pay income taxes on the amount transferred in the year of the conversion. The benefit is that once the funds are in a Roth IRA, they grow tax-free, and qualified withdrawals are not subject to income tax. Roth IRAs also aren’t subject to Required Minimum Distributions, which can give you more flexibility in retirement. A conversion can be particularly appealing in years when your income is lower, when markets are down, or if you expect tax rates to rise in the future.
Donor-Advised Fund (DAF)
A Donor-Advised Fund works like a charitable giving account. You contribute cash or investments to the fund, receive an immediate tax deduction for that contribution, and then recommend grants to charities over time. This allows you to “bunch” charitable gifts into one tax year to maximize deductions while still spreading out the donations in future years. It’s also a flexible way to organize giving if you want to be strategic with timing or invest charitable dollars for potential growth before directing them to causes you care about.
Each of these strategies— QCDs, NUA, Roth conversions, and Donor-Advised Funds— come with specific rules and benefits that depend on your personal situation. Reviewing them before year-end ensures you have time to take action if they make sense for you.
Information as of 9.25.25
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