Year-End Tax Planning Moves

Episode Summary

Executive Summary: The episode is a year-end tax-planning discussion focused on how high earners, investors, and business owners can reduce or defer 2025 taxes through charitable giving, equity compensation timing, tax-loss harvesting, retirement account maximization, and state/local tax strategies. It emphasizes that tax advice is inseparable from overall financial planning and highlights several 2026 rule changes that make proactive planning especially important.

Main Topics: Tax planning as part of total financial strategy (Priority: 5/5): Bill Artzeronian argues taxes touch nearly every part of a financial plan—cash flow, insurance, estate planning, portfolio management, and intergenerational wealth transfer—so tax decisions should be integrated into broader financial advice. Common year-end mistakes and tax deferral misconceptions (Priority: 5/5): The conversation distinguishes between tax avoidance and tax deferral, warning that many popular moves only postpone taxes. It also highlights mistakes around capital-gains timing and overpaying estimated taxes. High-income earners: charitable giving, equity compensation, and small business planning (Priority: 5/5): For affluent professionals, the main levers are charitable deductions, managing taxable income from stock-based compensation, and optimizing qualified business income and retirement contributions for business owners. Retirement, HSA, and Roth account opportunities (Priority: 4/5): The hosts review 401(k), IRA, HSA, mega backdoor Roth, and backdoor Roth options, noting contribution limits and the value of tax-free growth buckets for long-term planning. Tax-loss harvesting and direct indexing (Priority: 4/5): Tax-loss harvesting is presented as an ongoing strategy rather than a December-only tactic, with direct indexing making it more systematic. State-level rules can materially change the approach. Impact of new SALT and charitable deduction rules (Priority: 5/5): The discussion covers the increased SALT deduction cap under the new tax law and upcoming 2026 charitable deduction restrictions that may make 2025 a preferable year to accelerate giving.

Key Arguments: Tax planning should be treated as financial planning because taxes affect nearly every major wealth decision, from cash flow to estate transfer. Deferring taxes is not the same as eliminating them; many strategies simply postpone the bill, so investors should understand the timing tradeoff. Timing capital gains matters: moving gains into a later tax year can create room to harvest losses and improve overall after-tax results. Charitable giving can be one of the best tax levers, but it only helps if itemized deductions exceed the standard deduction threshold. Equity-compensated workers should manage the timing of stock-option income to avoid unnecessarily higher tax brackets or AMT exposure. Small business owners need to manage QBI limitations and ensure adequate cash flow to maximize retirement contributions. Tax-loss harvesting should happen throughout the year, not just in December, especially in diversified or direct-indexing portfolios. HSA and Roth-style accounts are especially valuable because they create tax-free buckets that can be useful in retirement or early retirement gaps. New federal rules make 2026 catch-up contributions Roth-only for older workers, which reduces current deductions but improves tax diversification. The SALT cap increase from $10,000 to $40,000 helps many high-tax-state households, but the benefit phases out for very high incomes.

Data Points: 401(k) contribution limit: $70,000 - Maximum employer + employee 401(k) contributions discussed for the current year and next year. Catch-up contribution amount: $7,500 - Catch-up contributions for workers over 50 referenced as current and next-year amount. SALT deduction cap: $40,000 - New cap discussed as an increase from the prior $10,000 limit. Prior SALT cap: $10,000 - Limit in place since 2017 before the new legislation. SALT phaseout threshold: Starts above $500,000 of total income - Phaseout begins for both single and married filers. SALT phaseout end: $600,000 - At this income level the benefit is fully reduced back to $10,000. Charitable deduction floor: 0.5% of AGI - Beginning next year, the first 0.5% of adjusted gross income given to charity is not deductible. Top-bracket charitable treatment: 37% bracket treated as 35% taxpayers - Highest earners lose some deductibility value under upcoming rules. QBI deduction: 20% - Pass-through business income deduction discussed for small business owners. Estimated tax timing window: Push gains from Q4 2025 to Q1 2026 - A strategy to preserve an extra 12 months for tax-loss harvesting opportunities.

Pivotal Quotes: "tax advice is financial advice" — Bill Artzeronian: Explaining why taxes should be considered across the entire financial plan. "Our clients would rather save $1,000 on taxes than make six figures in a trading day." — Bill Artzeronian: Emphasizing the practical value clients place on tax savings. "Nobody ever regrets a Roth contribution." — Bill Artzeronian: Discussing why Roth-only catch-up contributions may still be beneficial.

Implications: Listeners should plan before year-end to capture deductions, manage income timing, and use tax-advantaged accounts efficiently. New 2026 rules make 2025 especially important for charitable and SALT planning.