Your Year-End Tax Planning Checklist: 7 Steps to Review Before December 31

Year-end tax-efficient planning means looking at how your income, investment gains, charitable giving and tax payments fit together before December 31. Reviewing these decisions together can help you identify opportunities and avoid unexpected costs.

Should you convert part of your IRA to a Roth account? Have you taken your required minimum distribution? Could an additional withdrawal affect your Medicare premiums or eligibility for a tax deduction?

For individuals and families in St. Joseph, Michigan, and across Southwest Michigan, this checklist offers a starting point for a conversation about how financial planning and tax preparation work together. Wolf Financial Advisory CEO Rob Wolf explains in this video.

1. Coordinate Your Financial Plan and Tax Preparation

Tax preparation looks at what happened during the year. Tax-efficient planning helps you consider what to do while there is still time to make a difference. Connecting the two can help your team evaluate decisions before they appear on your tax return.

Our addition of Wolf Tax and Consulting Services LLC adds tax preparation experience to the broader planning conversation for our clients. Coordinating with your tax professional can help connect investment withdrawals, charitable gifts and other financial decisions with their tax consequences.

Bring your latest tax return and a summary of this year's expected income to your review. Your team should understand both what has changed and what you intend to do next. Explore how Wolf’s financial planning services bring these decisions together.

2. Review Your Income Before Taking Retirement Distributions

An additional withdrawal can affect more than your income tax bill. Before choosing which account to use, review how the transaction may influence income-based deductions and Medicare premiums. For a broader look at managing income and spending, read our guide to cash-flow planning.

Understand the Additional Senior Deduction

For tax years 2025 through 2028, eligible adults age 65 or older may qualify for an additional federal deduction of up to $6,000 per person, whether they itemize or take the standard deduction. The deduction begins phasing out when modified adjusted gross income exceeds $75,000 for individual filers or $150,000 for married couples filing jointly. Additional eligibility requirements apply.

A taxable IRA withdrawal or Roth conversion could reduce the deduction available to you. That makes the source and timing of a withdrawal worth reviewing before you move the money.

Consider the Effect on Medicare Premiums

Higher income can also increase Medicare Part B and Part D premiums through an income-related monthly adjustment amount, or IRMAA. Medicare generally uses tax information from two years earlier. A transaction that increases income this year could therefore affect premiums two years from now.

For Medicare, modified adjusted gross income generally means adjusted gross income plus tax-exempt interest. It is not the same as taxable income after deductions. Your advisor and tax professional should evaluate these calculations separately.

Before making a withdrawal, ask your Financial Advisor: Which account should supply the money? How much taxable income will it create? Could it reduce an income-based deduction or increase future Medicare premiums?

3. Evaluate Roth Conversions and Capital Gains

A Roth conversion moves money from a pretax retirement account into a Roth account. The taxable portion of the conversion adds to your income for the year, potentially providing more flexibility for future retirement withdrawals.

A comparatively low-income year may be a good time to evaluate a conversion. The amount should reflect your overall tax picture, including deductions, Medicare considerations and the money available to pay the resulting tax.

Your income projection should also account for real estate sales, realized investment gains and taxable distributions from investments held in taxable accounts. Mutual funds, for example, can generate taxable income through dividends and capital gain distributions, even if you have not sold any shares yourself.

Before deciding how much to convert, ask your Financial Advisor and tax professional to compare the projected results of different conversion amounts. A conversion that fits your tax bracket may still affect other parts of your plan. For more on coordinating retirement income and taxes, watch Taxes in Retirement: What to Think About Before & After Filing.

4. Review Required Minimum Distributions and Qualified Charitable Distributions

If you are subject to required minimum distributions, or RMDs, confirm how much you must withdraw and the deadline for each account. RMDs generally begin at age 73 for people born from 1951 through 1959, and age 75 for those born in 1960 or later. Different rules may apply to inherited accounts and certain workplace plans.

Most annual RMDs must be completed by December 31, although a first RMD may qualify for a later deadline. Delaying the first withdrawal can result in two RMDs in the following year, so review the tax consequences before choosing that option.

If you are at least age 70½ when the distribution is made, a qualified charitable distribution, or QCD, may offer another way to support the causes you care about. A qualifying transfer goes directly from your IRA to an eligible charity and can count toward your IRA RMD while excluding the qualifying amount from taxable income.

For example, suppose your remaining IRA RMD is $10,000 and you want to give $6,000 to your church. If the $6,000 transfer meets the QCD requirements, it can count toward your RMD. You would then have $4,000 remaining to distribute, ordinarily taxable if paid to you.

You do not need to itemize to benefit from a QCD, and qualifying gifts are not limited to your RMD amount. Annual limits and other eligibility rules apply. You cannot also claim a charitable deduction for a QCD excluded from income, and a QCD cannot go to a donor-advised fund. Coordinate the transfer before taking the money personally.

5. Consider a Donor-Advised Fund for Charitable Giving

Your charitable strategy should begin with the causes you want to support. Once those goals are clear, consider whether the timing and type of gift could make your giving more tax-efficient.

A donor-advised fund is a charitable giving account that allows you to contribute assets, potentially receive a tax deduction in the contribution year and recommend grants to eligible charities over time. Contributions are irrevocable, and the sponsoring organization controls the donated assets.

This approach may be useful before you reach QCD eligibility at age 70½, but it can also fit other charitable goals. For example, someone who normally gives $10,000 annually might contribute $55,000 to a donor-advised fund and recommend grants over several years. Combining gifts may make itemizing worthwhile in the contribution year, subject to deduction rules and limits.

Beginning in 2026, individuals who itemize generally can deduct charitable contributions only to the extent they exceed 0.5% of adjusted gross income, subject to other applicable limits. The amount contributed therefore may differ from the amount deductible that year.

A charitable deduction may help reduce the income tax associated with a Roth conversion, but it generally does not reduce the modified adjusted gross income used to calculate Medicare surcharges. Ask your advisor and tax professional to model the contribution, conversion and other income together.

6. Check Tax Withholding and Estimated Payments

If you have not paid enough tax during the year, you may face an underpayment penalty. A late estimated payment does not necessarily erase a shortfall from an earlier payment period.

One potential strategy is withholding federal income tax from an IRA distribution. Federal withholding is generally treated as paid evenly throughout the year, even when withheld late in the year. Depending on your circumstances, that treatment may reduce or eliminate an underpayment penalty.

The distribution itself can create taxable income, however. Before using this strategy, weigh the added income and its effects against the potential penalty relief.

Federal safe-harbor rules generally compare timely payments with 90% of the current year's tax or 100% of the prior year's tax, whichever is smaller. The prior-year percentage generally increases to 110% when prior-year adjusted gross income exceeds $150,000, or $75,000 for married individuals filing separately. Your tax professional can confirm the applicable requirements and payment timing.

7. Update Your Tax-Efficient Plan After Major Life Changes

A marriage, new child, job change, retirement or spouse's death can change your income, filing status and planning priorities. Let your advisor know when a change happens rather than waiting until tax documents arrive.

After a spouse dies, a surviving spouse may still qualify to file jointly for that year. In later years, a different filing status can mean narrower tax brackets and smaller deductions, depending on eligibility and family circumstances. Review those possibilities before accelerating income or making a major financial decision.

Your planning conversation should reflect both the financial impact and your personal priorities. Decisions after a significant life event should happen at a pace that feels manageable.

Bring Your Year-End Tax Questions Together

Many tax-efficient planning opportunities close on December 31. Certain eligible IRA and health savings account contributions can still be made by the following year's applicable tax filing deadline, but those exceptions do not replace a timely year-end review.

Before your meeting with a Financial Advisor, gather:

• Your latest tax return and an estimate of this year's income.
• Retirement account statements, distributions already taken and remaining RMD requirements.
• Information about investment gains, property sales and expected mutual fund distributions.
• Charitable giving plans and records of gifts already completed.
• Tax withholding and estimated payments made so far.
• Details about major changes in your family, work or finances.

Your Financial Advisor can help you consider how these pieces fit together and which decisions deserve attention before year-end.

Already a client? Contact your advisor when questions arise. You do not need to wait for your next scheduled review. Schedule a meeting today.

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