Planning Opportunities to Consider Before Year-End: Part 4 – Some Additional Considerations

We have covered some year-end planning opportunities over the past three weeks such as Required Minimum Distributions, Capital Gain Distributions, Roth Conversions and Charitable Giving Strategies.

All of the above actions for tax-year 2025, including maximizing workplace 401(k) contributions, must be made before Jan. 1, 2026, but there are some exceptions.  For example, maximizing deductible contributions to traditional IRAs and Health Savings Accounts for 2025 can often be made until April 15, 2026, the tax filing deadline. Non-deductible Roth IRA contributions for 2025 can also be made up until April 15, 2026.

Here are some additional areas we highlight for you to focus on now: 

Check withholding and estimated taxes 

Currently for 2025, the tax underpayments penalty is 7%. The IRS expects you to “pay as you earn” throughout the year rather than waiting until April 15 of the following year to settle up.  Please check your payroll withholding or quarterly estimated taxes, especially if your income has been uneven or included a windfall. Underpayment penalties can be easily avoided with proactive tax planning.

Most filers must pay 90% of their taxes from the previous year long before the April tax filing deadline to avoid the penalty. The due date is Dec. 31, 2025 for employees and Jan. 16, 2026 for those making fourth-quarter 2025 estimated payments.

Employees who raise their paycheck withholding late in the year often escape underpayment penalties for the entire year, and the IRS has posted a calculator to help figure how much you should withhold. Retirees and self-employed taxpayers must do their own income projections to determine their estimated tax payments, particularly where investment income (interest, dividends and realized capital gains) along with retirement account minimum distributions (RMDs) often make up the bulk of a taxable income.

What if, instead, you’re headed for a big 2025 refund? Given IRS backlogs, budget cuts and snafus, consider lowering withholding or estimated tax payments to minimize headaches if the refund is delayed.

Should I take the standard deduction, or should I itemize?

That is a loaded question and I am happy to share my view.  First, you need to assess your overall deductions.  Filers can reduce taxable income by subtracting one overall amount called the “standard deduction” from their adjusted gross income, or by detailing “itemized” deductions for mortgage interest, state and local taxes (see more on “SALT” below), charitable donations, medical expenses and others.   For 2025, the standard deduction amounts are as follows:

On July 4^th, 2025, President Trump signed into law the One Big Beautiful Bill Act. This was a long time coming, as the previous 2017 Tax Cuts & Jobs Act that passed back in December of 2017 was coming to an end.  I will not re-visit all of the items but instead include a direct link to the article from this past July, Our Big Bill Summary.

Some low hanging fruit: confirm via your income whether you qualify for the SALT itemized deduction up to $40,000. The increased SALT deduction begins to phase out when your modified adjusted gross income (MAGI), not taxable income, exceeds $500,000 and it fully phases out back to $10,000 when a taxpayer’s MAGI exceeds $600,000.  Making your quarterly state income tax payments before December 31, 2025, if this makes sense for you and you live in a high-income state, may be helpful here to reduced your MAGI and preserve a higher SALT deduction.

Quarterly tax payments must be made in the calendar year, not tax year, in order to be eligible as an itemized deduction.  Please reach out to your tax preparer/accountant to double check the math and when making these payments before 12/31/2025.

Another item noted above is the new $6,000 Senior Tax Deduction if you are 65 years old in 2025 or older.  This deduction is in addition to either your itemized deductions or the standard deduction.

Like the SALT deduction, the Senior deduction is gradually reduced—potentially to $0—for taxpayers with higher income.

• The deduction is reduced by six cents ($0.06) for every $1 over the threshold ($75,000 MAGI for single-filers/$150,000 for joint-filers.
• At $150,000 MAGI for singles or $250,000 for joint filers, the deduction is fully phased out.

Taxpayers taking the standard deduction for 2025 and beyond should evaluate whether it makes sense to “bunch” deductions to benefit from itemizing in some years.  The best deductions to bunch are typically charitable donations as we wrote about last week.  Bunching is harder for medical expenses, as many filers do not have expenses greater than the 7.5% income threshold.  For those who do, the medical services must be completed in the year of the deduction.

Make a game plan for inherited IRAs  

The IRS issued rules detailing required annual withdrawals from inherited IRAS are different if you inherited in 2020 or later. The upshot: Heirs of traditional IRAs whose owners had not begun required withdrawals by death and heirs of Roth IRAs have 10 years to completely withdraw the accounts. Exceptions to the 10-year rule apply for heirs who are spouses, minor children (not grandchildren) of the IRA owner, and certain others.

Heirs of traditional IRAs whose original owners had already been taking required minimum distributions also have 10 years to empty the accounts, with similar exceptions, but also must take minimum distributions based on their own life expectancy for years one through nine.  This requirement may make proactive tax planning helpful so that you don’t end up waiting and incurring a huge tax bill in year 10.  Everyone’s situation is different so speak with your ACM Wealth advisor if you’ve inherited an IRA after 2020.

Doing gig work or selling online? Updated IRS reporting requirements with “OBBBA” of July 25’

Form 1099-K is an IRS tax form issued by third-party payment platforms when you receive payments for goods or services. This includes applications and marketplaces like Venmo, PayPal, eBay, Airbnb, Uber, Turo, SeatGeek, and many others.  A copy goes to both you and the IRS. The reporting threshold has bounced around over the years — for 2024 it was $5,000, and beginning in 2025 it returns to the original rule: more than $20,000 and over 200 transactions.

You will typically receive a 1099-K by January 31 if you crossed the reporting threshold. It is common for business-related payments, gig work, rentals, or sales of goods and services. However, not all payments are taxable, especially personal transfers or selling used items at a loss — so receiving a form does not automatically mean you owe tax.

If payments sent to you were marked as “business” or “goods/services,” the payment processor files the 1099-K — not you. You will use the form to reconcile your income when filing taxes, and if something seems inaccurate, you can check your account dashboard or contact the provider. In short, if you received income for work, sales, or rentals through one of these platforms, a 1099-K helps the IRS track it and helps you report it correctly.

Please reach out to your ACM Wealth Advisor if you have any questions on these issues or any of the topics we’ve covered over the past several weeks.

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