The Big Picture Strategy

When you've had a financially successful year, your tax planning follows a simple theme with several variations: put money away for retirement, education, and medical costs, donate to charity, and move assets to family members who pay lower taxes.

Maximize Your Retirement Savings

401(k) Contributions

Make sure you contribute the maximum to your 401(k). If you're 50 or older, don't forget to add the catch-up contribution on top of the regular limit.

Roth IRA Strategy

• If you qualify: Contribute the maximum to both your Roth IRA and your spouse's Roth IRA.

• If your income is too high to qualify: Consider funding a non-deductible traditional IRA and then converting it to a Roth. This is called a "backdoor Roth" strategy.

Smart Charitable Giving

Large Donations Made Simple

If you want to make a big charitable donation, don't feel like you have to give it all to one charity right now. Consider using a donor-advised fund (like Fidelity's Charitable Gift Fund). Here's how it works:

• You transfer as much as you want to the fund this year

• You get a tax deduction now for the entire amount (within income-based limits)

• Later—even years later—you decide which qualified charities get how much and when

Donate Stock Instead of Cash

Big tax advantage: If you donate stock you've owned for more than one year, you get a tax deduction for the current market value AND you avoid paying taxes on the gains. There are income-based limits on this deduction.

Important timing: Make your donation early so it's processed by December 31st.

Keep Assets in the Family

Annual Gift Tax Limits for 2025

• $19,000 per person you can give without any paperwork

• $38,000 per person if you're married and both spouses agree to "gift-splitting"

• Gifts above these amounts require filing a gift tax return, but you won't actually pay gift tax until your lifetime gifts reach millions of dollars

Smart Gifting Strategy

Consider giving away assets that have increased in value. This moves the future gains to family members who might be in lower tax brackets.

Payment Tips

• If giving by check, use a cashier's check or make sure the recipient cashes it by December 31st

• Special rule: Payments made directly to colleges for educational expenses and directly to medical providers for medical care don't count toward your annual gift limits

College Savings (529 Plans)

Why 529 Plans Make Sense

• Contributions aren't tax-deductible, but they move money out of accounts that produce taxable interest and dividends

• You can open 529 accounts for anyone of any age, not just your own children

• Money can now be used for elementary education, and starting July 4, 2025, for secondary school too

Advanced Strategy

Consider "front-loading" by contributing five years' worth of contributions in the first year. This moves a large amount out of your taxable estate quickly.

Don't Forget About Estimated Taxes

If you've had a great year, make sure you've paid enough taxes to avoid penalties. You have two options:

• Increase withholding: Boost the taxes taken from your paychecks between now and December 31st

• Make estimated payments: Send in a payment as soon as possible

Remember, it's better to pay a little extra now than to face penalties later.

The Bottom Line

A successful year gives you more tax planning opportunities, but it also means you need to be proactive. The key is moving money strategically—into retirement accounts, to charity, or to family members—while making sure you've paid enough taxes to keep the IRS happy.