Year-end tax planning: Strategies to optimize savings

The final months of the calendar year offer an opportunity to reduce tax liabilities and strengthen financial planning, according to local advisors and accountants who welcome this time as one of strategizing and strengthening.

“This is my most favorite time of year because it’s not compliance driven and it’s not really deadline driven,” said Kristina Stamatis, CPA, a partner at MMB+CO. “It’s more a time for strategic planning, which I really feel is where I can provide the most value to my clients.”

Two of the most common discussions that happen every year around this time are tax minimization strategies to defer income and accelerate deductions and ensuring contributions to certain tax-deferred accounts are made by the end of the year. This year, there is also new legislation that gives accountants and advisors a few more avenues to help clients accomplish tax optimization.

“With the One Big Beautiful Bill Act, a big thing, especially for New York State residents, is the increase in the state and local tax cap that went from $10,000 to $40,000,” Stamatis said. “Being New York State residents, we’re in a high-income tax and high property tax state, so New Yorkers are really going to be able to take advantage of itemizing once again.”

Stamatis explains that people may want to bunch their itemized deductions, meaning not only prepaying New York State estimated taxes for the fourth quarter and prepaying their property taxes, which are due in January, but also bunching charitable contributions into one year to get the most optimal return out of those itemized deductions.

Bunching is a tax strategy where donors group multiple years’ worth of charitable contributions into a single tax year rather than spreading them out annually.

“ One other thing to consider by the end of the year is the change with the energy credits,” said Stamatis, who explains key federal clean-energy tax credits for homeowners are set to expire at the end of 2025. “There’s still time to replace your water heater, your doors, your windows, etc., to maximize those savings as well.”

Overall, Stamatis encourages people to reach out to their advisors if they haven’t already to discuss their own individual situation and ideas for tax optimization by year’s end.

“There are things that can be done now to save you tax dollars,” she said. “Organization is key. We’re very proactive at the firm and in our industry, reaching out to our clients and saying, ‘Okay, it’s time for year-end planning.’”

Marcus Cortellini, CPA, a partner at Insero Advisors, LLC, says tax optimization is important and that it’s not just one action, but a series of actions.

“It’s really a coordinated set of strategies,” Cortellini said. “Some of them include timing of income and deductions, for example, whether to accelerate income into a current year or defer it to the next. Similarly, whether to accelerate deductible expenses or defer them, depending on what bracket you’re going to be in and other factors.”

This year in particular, Cortellini is having a lot of year-end discussions with his clients about charitable giving due to the scheduled sunsetting of the federal 2017 Tax Cuts and Jobs Act provisions at the end of 2025. One impact will be a reduction in the value of itemized deductions for high-income taxpayers.

“New rules come into play for charitable deductions in 2026, where high-income earners can be limited on their charitable deductions,” he said. “So, our recommendation now for clients that are historically charitable is to consider bunching.”

Cortellini says his client base tends to be proactive and that he’s been booking end-of-the-year meetings in abundance with both his individual and business clients. He enjoys this time of the year to reconnect with his clients and to hear how their year has been.

“All the conversations I’ve had this year have been very positive,” he said. “Clients continue to be strong, which is good, and I’m excited that they’ve had a good year.”

Dana Vosburgh, CFP, managing director of advisory services at Manning & Napier, looks at tax optimization as a longer-term perspective on tax planning, rather than a seasonal one.

“There are certainly things that you can do at year’s end, but from a tax optimization standpoint, there are certain strategies that you want to put in place that lower your taxes over the course of your entire lifetime or over a longer term period of time,” he said.

Vosburgh sees this mindset and approach geared more toward net growth in your portfolio after taxes, as opposed to just minimizing taxes.

“There’s a lot of discussion now on something similar to tax optimization called tax smoothing, where you’re kind of smoothing out your taxes that you pay over a period of time and over years as opposed to just always focusing on lowering your taxes in the current year that you’re in,” he said.

When it comes to tax optimization or smoothing, Vosburgh stresses that everybody’s situation is, is different and that sitting down with your advisors in any season is important.

“I think it’s actually better to incorporate it into your planning throughout the year,” said Vosburgh, who expounds that approach can ease some of the feeling, or urgency or concern at the end of the year that you’re missing out or that it’s too late. “Having a mindset that’s more geared toward year-round planning and an ongoing process is helpful.”

Caurie Putnam is a Rochester-area freelance writer.

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