Making the Most of Year-End: A Practical Guide
December 2025
Year-end planning letters typically arrive stuffed with charts, acronyms, and dozens of action items that leave you feeling overwhelmed before you finish reading. We’re going to take a different approach. Let’s talk about the handful of things that actually move the needle.
The Big Picture
Before we dive into tactics, let’s be clear about what matters: You want to keep more of what you earn, protect what you’ve built, and pass on something meaningful to the people and causes you care about. Everything else is just mechanics.
The tax code changes regularly, exemption limits shift with inflation, and Washington will continue to tinker. But the fundamental principles don’t change: defer taxes when you can, accelerate deductions when it makes sense, and don’t let the tax tail wag the investment dog.
What Has Changed
Congress passed the “One Big Beautiful Bill Act” (OBBBA) in July 2025 which impacts investors in several ways.
Charitable Giving:
Starting January 1, 2026:
- There’s a new 0.5% “floor” for itemized deductions. The first 0.5% of your adjusted gross income given to charity won’t be deductible.
- High earners in the 37% tax bracket will see the effective tax benefit of charitable deductions capped at 35%.
- Non-itemizers get a small above-the-line deduction ($1,000 single, $2,000 married) for cash gifts to public charities—but not donor-advised funds.
Consider accelerating planned future gifts into 2025.
Estate and Gift Tax:
The current federal estate and gift tax exemption is $13.99 million per person ($27.98 million for married couples). In 2026, it increases “permanently” to $15 million per person. If your estate approaches or exceeds these thresholds, and you’re comfortable parting with the assets, making gifts now removes not just the asset value but all future appreciation from your estate.
Business Owners:
The OBBBA reinstated 100% bonus depreciation for certain qualified property acquired and placed in service after January 19, 2025. Section 179 expensing limits also increased.
If you’ve been considering equipment purchases or other qualifying capital investments, the tax benefit is back in play. Consult your tax advisor—these rules get complicated quickly.
What Hasn’t Changed
The Annual Exclusion:
You can give $19,000 per recipient in 2025 ($38,000 for married couples) without touching your lifetime exemption. This amount stays at $19,000 for 2026. These gifts can go to anyone—kids, grandkids, friends, the neighbor’s kid—and don’t require filing a gift tax return.
You can also pay tuition or medical expenses directly to the institution on anyone’s behalf, and those payments don’t count against anything. No limits, no forms, none of your lifetime exemption used.
If you have the means and the inclination, this is one of the simplest ways to reduce your estate while helping people you care about.
Retirement Accounts:
Required Minimum Distributions (RMDs): If you’re 73 or older (75 if born in 1960 or later), you must take your RMD by December 31. The penalty for missing it is 25% of the amount you should have withdrawn. Don’t let that happen.
If you’re 70½ or older and don’t need the cash, consider Qualified Charitable Distributions (QCDs). Send up to $108,000 per person ($216,000 for married couples) directly from your IRA to qualified charities. This satisfies your RMD and keeps the distribution out of your taxable income. It’s elegant in its simplicity.
2025 Contribution Limits:
- 401(k) and similar plans: $24,500 (plus $8,000 catch-up if you’re 50+; $11,250 “super catch-up” if you’re 60-63)
- Roth IRAs and IRAs: $7,000 (plus $1,000 catch-up if you’re 50+)
Max these out if you can.
Roth Conversions:
Making a Roth Conversion depends on the assumptions you make about future returns and taxes. It gets complicated quickly and it’s hard to find a useful rule of thumb, but we find partial conversions over time useful for flexibility and adaptability. The idea is to convert amounts that do not bump you into a higher tax bracket and to minimize the opportunity cost of paying the taxes on the conversion amount. You must factor that into your decision because the goal is to have more AFTER-TAX money. List your assumptions and run the numbers.
Tax Loss Harvesting:
If you have investments sitting at a loss, consider selling them before year-end to offset capital gains. You can use up to $3,000 of losses to offset ordinary income and carry forward any remaining losses indefinitely.
Remember the Wash Sale rule—don’t buy the same or substantially identical security within 30 days before or after the sale, or you’ll lose the tax benefit.
Charitable Giving:
The 60% AGI limit for deducting cash gifts remains the same as does the 30% AGI limit for giving appreciated securities. Contributions that exceed your AGI limits in one year can be carried over and deducted in the five following tax years, subject to the same limits in those future years. Giving appreciated securities instead of cash avoids capital gains tax on the appreciation. All of which can complicate your giving considerably, see our essay in Muhlenkamp Memorandum 148 for suggestions on how to choose between cash, securities, or some combination of both.
Standard deductions of $15,750 and $31,500 were made permanent, Donor-Advised Funds (DAFs) remain useful if you want to bunch several years of donations into one year (to exceed the standard deduction threshold) while distributing the grants over time. Just note that the new above-the-line deduction for non-itemizers specifically excludes DAF contributions.
Our Year-End Checklist
Here’s what deserves your attention before December 31:
Income Tax:
- Harvest tax losses to offset gains.
- Make charitable donations using appreciated securities.
- Maximize retirement account contributions.
- Take your RMD and consider QCD.
- Review your withholding on W-2 income, IRA Distributions, etc.
Estate Planning:
- Make annual exclusion gifts ($19,000 per recipient)
- Fund 529 plans (some states have year-end deadlines for deductions)
- Review life insurance premium payments and trustee arrangements.
- Consider larger gifts if you’re approaching exemption limits.
- Review beneficiaries and fiduciaries—make sure they’re still appropriate.
Precautions
- Do not turn your portfolio inside out for tax reasons, create complex entities you don’t need, or chase exotic strategies that sound clever but add little value.
- Do not attempt to predict what Congress will do next year, what the Fed will do with rates, or whether the market will go up or down. You will, likely, be wrong.
- Pay careful attention to taking available deductions, using exemptions wisely, and planning with a realistic view of your circumstances.
Conclusion: None of the above is glamorous, but all of the above is useful. It helps to build wealth if you avoid, defer, or minimize taxes.
The comments made are opinions and are not intended to be investment advice, legal advice, or tax advice. Please consult your tax advisor, attorney, and financial advisor before taking any action. Past performance does not guarantee future results.
