The end of the year is fast approaching, and another tax year is right around the corner. Fortunately, there are a few actions you can still take before year end to lighten the load come April 15. Here are a few ideas to consider.
Tax loss harvesting. Did you know that sometimes a bad investment idea can still produce results? If you’re willing to surrender and bail on your losers, capital losses (selling stocks or other assets for less than you paid for them) can be used to reduce taxes on gains you may have captured.
You can apply losses realized during the year to offset realized gains, reducing your taxable capital gains income. If losses exceed gains (face it, it happens), you can apply up to $3,000 against current earned income and carry the balance of net losses forward to use in future more profitable years.
If you have unrealized losses but still believe in the investment (hope spring eternal), you can recognize the loss by selling now and repurchasing after 30 days to avoid the IRS rules against what are called wash sales. Collect the loss, buy it back on day 31, and you’re golden.
Maximize retirement plan contributions. Limits on employee retirement plan contributions are adjusted upward each year for inflation. For 2025, participants in a 401(k) or 403(b) plan are allowed to set aside up to $23,500 from their salary, although only 1 in 8 employees contribute the maximum amount.