Contributed by: Dale Shaw, CFP®, RICP®
As the final quarter of 2025 draws to a close, households with significant income face a familiar but often underused opportunity: proactive year-end tax planning. While the demands of business, family, and holiday schedules can understandably take center stage, those in higher tax brackets often stand to benefit the most from timely financial decisions made before December 31.
Year-end planning is not simply about minimizing this year’s tax bill—it’s about shaping a more tax-efficient financial future, preserving wealth, and ensuring that today’s decisions align with tomorrow’s goals. While the window to act narrows, meaningful planning opportunities remain—especially for those with the clarity and guidance to take action.
Why High-Income Households Benefit Most From Year-End Planning
For families earning above $500,000 annually—or managing investable assets in the millions—year-end tax planning can materially impact their effective tax rate and long-term financial strategy. Many key opportunities, such as charitable giving, retirement contributions, and income deferrals, require execution before December 31 to count for the 2025 tax year.
Delaying until tax season often means accepting missed opportunities. More critically, for corporate executives, business owners, and affluent families, decisions in one area—compensation, investments, or estate planning—can have direct implications on the others. Coordination is essential, and the fourth quarter offers a concentrated opportunity to align tax planning with broader wealth objectives.
Deductions: Optimizing What Still Works in 2025
While the standard deduction continues to rise—now $15,750 for individuals and $31,500 for married couples filing jointly in 2025—high-income households often benefit from itemizing. When done strategically, itemized deductions remain a powerful tool for reducing taxable income.
Charitable Giving remains the most flexible and impactful deduction available. In 2025, families can deduct up to 60 percent of adjusted gross income (AGI) for cash gifts to qualified charities, and up to 30 percent for donations of appreciated securities. Donor-Advised Funds (DAFs) continue to serve as a preferred vehicle, allowing donors to “bunch” multiple years of giving into one for tax purposes, while spreading the actual distributions over time.
State and Local Taxes (SALT) previously capped at $10,000 and now raised to $40,000 at the federal level, up to certain income phaseout levels. However, in states like Texas where there’s no personal income tax, this limit can be less relevant. It could still be useful for deducting property taxes if you itemize.
Miscellaneous Itemized Deductions continue to be suspended through 2025 under the Tax Cuts and Jobs Act (TCJA), but medical expenses above 7.5 percent of AGI remain deductible. For families anticipating large medical costs, prepaying before year-end may yield a greater deduction.
Deferrals: Managing Timing for Strategic Income Control
Income deferral is especially effective when expecting a lower income year ahead—due to retirement, the sale of a business, or restructuring of compensation.
Corporate executives may have the option to defer end-of-year bonuses or elect into non-qualified deferred compensation plans. While these decisions often need to be made earlier in the year, their implications should be reviewed before year-end to coordinate with other tax strategies.
Business owners operating on a cash basis can accelerate deductible expenses or defer income where appropriate. Contributions to retirement plans such as SEP IRAs, Solo 401(k)s, or Defined Benefit plans can provide large deductions while preserving liquidity and supporting long-term retirement goals.
Private real estate investors may choose to delay capital gain recognition, execute 1031 exchanges, or increase depreciation using cost segregation. Meanwhile, investments in Qualified Opportunity Zones (QOZs) still offer deferrals of capital gains, though the benefits are usually more effective when held long term.
Capital Gains and Losses: Harvesting with Precision
Tax-loss harvesting remains a central strategy at year-end, particularly for portfolios with concentrated gains or recent volatility. Selling securities at a loss to offset realized gains can materially reduce tax exposure.
That said, harvesting should be conducted with a clear understanding of the broader investment strategy. Rebalancing, risk exposure, and long-term goals must remain intact. Wash sale rules continue to apply, disallowing losses on securities repurchased within 30 days.
Losses can offset unlimited capital gains and up to $3,000 of ordinary income per year. Any unused losses carry forward indefinitely, making them valuable in years of strong performance or liquidity events.
Charitable Giving: A Strategic Window for Impact
The final months of the year are a prime window for charitable giving. Beyond the tax deduction, philanthropy can be an intentional opportunity to engage family members, define legacy values, and align resources with purpose.
For individuals age 70½ or older, Qualified Charitable Distributions (QCDs) from IRAs remain an efficient giving tool. In 2025, the annual QCD limit increased slightly to $108,000 per individual, and can satisfy all or part of a required minimum distribution without increasing taxable income.
Families seeking longer-term giving vehicles may consider Charitable Remainder Trusts (CRTs) or Charitable Lead Trusts (CLTs), which can balance income needs, estate planning objectives, and philanthropic intent.
Retirement Contributions: Maximizing 2025 Limits Before Deadlines
While some contributions—such as traditional and Roth IRAs—can be made up until the April filing deadline, many employer-based contributions must be completed before December 31.
Updated 2025 contribution limits are as follows:
- 401(k): $23,500 (plus a $7,500 catch-up for those age 50 and older, or up to $11,250 catch-up for those between 60-63)
- IRA (Traditional and Roth): $7,000 (plus a $1,000 catch-up)
- Health Savings Account (HSA): $4,300 for individuals, $8,550 for families (with a $1,000 catch-up for those 55 and older)
Defined Benefit and Cash Balance Plans—increasingly used by high-earning professionals and business owners—allow for significant pre-tax contributions. Maximum allowable contributions can exceed $300,000 depending on plan structure, age, and income, and must be actuarially certified.
Backdoor Roth IRA strategies remain a common workaround for high earners who exceed direct contribution limits, though care must be taken to avoid triggering the pro-rata rule when pre-tax IRA balances exist.
Estate and Gift Planning: Use the Exemption While It Lasts
Perhaps the most time-sensitive planning opportunity heading into 2026 is the lifetime estate and gift tax exemption.
In 2025, the exemption rose to $13.99 million per person, or $27.98 million per married couple. However, under current law, this amount will be increasing to $15 million per person and $30 million per married couple in 2026.
Now is the time to consider:
- Spousal Lifetime Access Trusts (SLATs)
- Irrevocable Life Insurance Trusts (ILITs)
- Grantor Retained Annuity Trusts (GRATs)
- Family Limited Partnerships (FLPs)
Even those not yet ready to part with large sums of wealth may benefit from using techniques that preserve access or control while removing assets from the taxable estate.
Coordination Is Key: One Decision Can Affect Many Others
What makes year-end planning so complex—and so powerful—is that it is rarely about one isolated move. Every strategy has ripple effects. A Roth conversion may impact Medicare premiums. A deferred bonus could influence cash flow and gifting. A charitable deduction may change AGI thresholds for other deductions.
This is where coordinated advice makes all the difference. At Granite Harbor Advisors, we don’t approach year-end planning as an afterthought. We approach it as an opportunity to align your financial decisions with your greater purpose, ensuring that tax strategies support—not disrupt—your investment, estate, and legacy planning.
Our team-based model, combined with access to both public and private market opportunities, helps clients make these decisions confidently, and in full coordination with their legal, tax, and insurance professionals.
The opportunity to optimize your 2025 tax outcome ends soon. But the impact of wise decisions made today will resonate far beyond this tax year.
Quick-Reference Year-End Considerations
- Review whether itemizing deductions will reduce taxable income.
- Complete charitable giving (cash, appreciated securities, or DAF contributions).
- Evaluate SALT deductions and property tax timing.
- Prepay medical expenses exceeding 7.5% of AGI if beneficial.
- Review timing of bonuses and deferred compensation elections.
- Business owners may accelerate deductible expenses or defer revenue
- Conduct tax-loss harvesting while maintaining long-term investment alignment.
- Consider 1031 exchanges, cost segregation, or Qualified Opportunity Zone investments.
- Complete QCDs if age 70½ or older.
- If a part of your strategy, round out 2025 retirement plan contributions (401(k), IRA, HSA)
- Evaluate Defined Benefit and Cash Balance Plan funding.
- Assess estate and gift planning strategies before exemption changes.
- Coordinate strategies with advisors to avoid conflicting AGI or cash-flow impacts.
- If applicable, ensure Required Minimum Distributions are taken from retirement accounts to avoid penalties.