Effective Year-End Tax Planning Strategies for Individuals and Business Owners
Year end Tax Planning seems to always happen like this... There are 2 weeks left in the year... Oh I need to call my financial advisor and tax advisor and see what I can do to reduce my taxes! We at NEST Financial get this every year, right during the holidays, we encounter more and more people asking this question. You probably should have started planning months ago, but that’s alright.
We’ve listed a few strategies that have worked for individuals and business owners. Ask a financial advisor or tax professional to find out if any of them work for you. Don’t have either? We do! Email us at info@nestfinancial.net to get connected.
Is there still time to apply these strategies? Possibly. It depends on how quickly you get started so let’s not waste any more time and begin.
Increase tax-deferred retirement savings contributions
Traditional IRAs, traditional 401(k), SEP IRAs, 403(b) — just to name a few — are all accounts to consider. In general, contributing to these tax-deferred retirement accounts allows you to decrease your income for the year the contributions were made. However, keep in mind that there are contribution limits, which you can view on the IRS.gov website.
If you’re a business owner or work for yourself, consider opening and funding a SEP IRA. For next year, look into a solo 401(k), a retirement plan for a business owner with no full-time employees.
Defer income to next year
This strategy can apply to business owners or investors. As a business owner, delay invoicing clients until January. As an investor, if a deal is about to pay out, explore if you can defer a portion of the payment to the following year. This spreads income across two years, lowering your taxable income for the current year.
Tax loss harvesting
A popular strategy in volatile years, tax loss harvesting involves selling investments that have lost value, then buying them back after 31 days (to avoid the Wash Sale rule) to write off the losses against gains. Note that losses can only offset $3,000 of ordinary income. This strategy can get complex — professional guidance is a good idea.
Oil and gas investments
Oil and gas funds come with significant tax advantages. If you're facing a big tax bill from capital gains or stock option liquidations, investing in these can allow you to deduct up to 90% of your investment amount.
This means a $100,000 investment could yield a $90,000 deduction, potentially saving you $32,000 in taxes if you're in the 35% bracket. However, these are not your average brokerage account investments — they carry significant risk and should be considered with caution and professional guidance.
The absolute best strategy is simply planning
At NEST, we’ve seen the need for both short-term and long-term planning grow dramatically. These last-minute tactics can help, but true transformation lies in year-round strategy. Planning ahead allows for strategies with much larger potential benefit.
Curious to learn more? Give us a call at 512-944-4882.
Gloria Park, CFP® professional and Managing Partner at NEST
This article is brought to you in part by the wizard behind the scenes with 23 years of experience, Dan Dillard. Of course, with his workshop of helpers, including some handy hi-tech sourcing.
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DISCLAIMER: The above general discussion is provided for background information only. This information is not intended to be individual advice. Prospective participants should consult with their personal tax professional regarding the applicability and effect of any and all benefits for their own personal tax situation. Certain investments are only available to accredited investors. In addition, tax laws change from time to time and there is no guarantee regarding the interpretation of any tax laws. Investing in oil and gas is highly speculative and could result in substantial losses. There are no guarantees that any returns will be achieved. Potential investors should consult their attorney, accountant, and financial advisors before investing in oil and gas