Year-round tax planning strategies: 7 tax tips to help you plan ahead

In short: Tax planning means making decisions throughout the year to help lower taxes, manage income and keep more of what you earn. Because your income, investments and other factors all affect each other, tax planning is most effective when it’s part of your overall financial plan. And when you plan early, you have more room to adjust.

Many people scramble to prepare their taxes in April, but the bigger opportunities in tax planning often happen in seasons: after you file, at mid-year, in the fall and before year-end deadlines. 

Before you act:

• Tax laws, contribution limits and income thresholds can change. Confirm current IRS limits and review any strategy with your tax and financial professionals before making decisions.
• Don’t focus on individual tax tactics. The biggest benefits often come from coordinating your decisions across income, investments, giving and estate planning.
• Many tax planning strategies work best over several years, not just at year-end. And not every strategy will apply every year. Some will only apply when your income is unusual or you experience a life event.

What is year-round tax planning?

Year-round tax planning is the practice of reviewing and adjusting tax-related decisions before filing season. It helps you manage income, deductions and investments while you still have time to act.

Tax preparation looks backward and focuses on filing an accurate return for the year that ended. Tax planning looks forward and helps you make choices during the current year that may reduce surprises or support a stronger after-tax outcome.

Year-round tax planning may be especially useful if you have:

• Variable income or bonus compensation
• Equity compensation or stock options
• Self-employment income
• Investment income or capital gains
• Rental property
• Charitable giving goals
• Retirement income planning needs
• Required minimum distributions
• Estate planning or wealth transfer goals

This guide outlines seven tax planning tips and a year-round checklist to help you plan with more confidence and fewer surprises.

1. Check your paycheck withholdings early

You should review paycheck withholdings early in the year and again after major life or income changes.

An incorrect W-4 can lead to an unexpected refund or a surprise balance due. A large refund may feel good, but it often means you gave the government an interest-free loan. Conversely, a large tax bill can create cash flow pressure and may trigger underpayment penalties in some situations.

Use the IRS Tax Withholding Estimator to see if you’ve been withholding the right amount. If you need to adjust, file a new Form W-4 with your employer. It’s also smart to check state income tax withholding, especially if you moved, changed jobs or began working in more than one state.

When to review withholdings:

• You changed jobs or received a raise
• You got married, divorced or had a child
• You started a side business
• You received a bonus or equity compensation
• You sold investments or real estate
•  You owed a large tax bill or received a large refund last year

Quick example: Let’s say you owed $3,000 when you filed your return. Instead of waiting until next April, you could spread that amount across your remaining pay periods. If you’re paid twice a month and have nine months left in the year, adding about $167 per paycheck may help close the gap before tax time.

2. Contribute to tax-advantaged accounts throughout the year

Tax-advantaged accounts, such as 401(k) plans and HSAs, can help reduce taxable income, build long-term savings and create tax diversification.

Regular contributions can do more than lower your tax bill. They can help you build momentum toward retirement, healthcare, education and family goals while also influencing how much taxable income you recognize each year.

Retirement accounts

Contributions to a traditional 401(k), 403(b) or traditional IRA may be tax-deductible (depending on plan rules and eligibility). Catch-up contributions may apply if you’re 50 and older.

401(k) contributions generally must be made by year end. IRA contributions may be allowed up to the tax filing deadline, depending on eligibility and account type.

529 plans for education

A 529 plan can offer tax-free earnings and withdrawals for qualified education expenses. Some states also offer tax deductions or credits for contributions.

HSAs and FSAs

Health savings accounts (HSAs) give you the triple tax benefit of tax-deductible contributions, tax-free earnings and tax-free withdrawals for qualified medical expenses. You generally need to be enrolled in an eligible high-deductible health plan to contribute.

Flexible spending accounts (FSA) and Dependent Care FSAs (DCFSA) let you set aside pre-tax dollars for healthcare costs and dependent care. Depending on the plan, you may need to use the funds within the calendar year or shortly thereafter.

Quick example: If you receive a mid-year bonus, you may be able to direct part of it into your workplace retirement plan. Doing so may reduce taxable income while keeping your savings plan on track.

3. Evaluate whether a Roth IRA conversion makes sense

A Roth IRA conversion may make sense if you expect future tax rates to be higher, have a temporary low-income year or want more tax flexibility in retirement. Because a conversion creates taxable income in that year, review the impact before you act.

A Roth IRA conversion moves assets from a traditional IRA or eligible workplace retirement account into a Roth IRA. You generally pay income tax on pre-tax dollars and earnings converted. In return, qualified Roth IRA withdrawals may be tax-free in retirement.

A conversion can be useful when your taxable income temporarily drops. That might happen after retirement but before Social Security benefits begin, during a business transition or in a year with lower investment income.

A common approach is to convert just enough to stay in your target tax bracket. This turns a Roth conversion into a multi-year planning strategy rather than a single decision.

Quick example: Say you retire before claiming Social Security and your taxable income temporarily drops. That lower-income window may create room to convert part of a traditional IRA to a Roth IRA. You’d pay taxes now but may reduce future RMDs and create more tax flexibility later.

Watchpoint: A Roth conversion can affect Medicare premiums, tax credits, deductions, and how Social Security benefits are taxed. Review the full impact with your tax and financial professionals before you convert.

4. Plan for required minimum distributions (RMDs) and qualified charitable distributions (QCDs)

Required minimum distributions are taxable withdrawals that many retirement account owners must take each year after reaching a certain age. Planning early can help you manage income and avoid penalties.

Traditional IRAs, SEP IRAs, SIMPLE IRAs and many employer-sponsored retirement plans require annual withdrawals once you reach the applicable age. In most cases, the deadline is the end of the year and missing an RMD can trigger penalties.

RMDs can raise taxable income, which may affect your tax bracket, Medicare premiums, deductions and credits. If you don’t need the cash flow and want to support qualified charities, a qualified charitable distribution may help.

A qualified charitable distribution, or QCD, allows eligible IRA owners to direct money from an IRA to a qualified public charity. When handled correctly, the amount may count toward your RMD while staying out of taxable income. This can be especially useful if you take the standard deduction and don’t itemize charitable gifts.

Quick example: If your annual RMD is $20,000 and you plan to give $5,000 to qualified charities, a QCD may allow you to direct that $5,000 from your IRA directly to charity. You’d still need to take or direct the remaining RMD amount, but the charitable portion may avoid taxable income treatment if the rules are met.

Watchpoint: Confirm charity eligibility, timing, annual limits and transfer rules before using a QCD. The distribution generally must go directly from the IRA custodian to the qualified charity.

5. Manage capital gains and investment taxes

You can manage capital gains taxes by timing sales, using losses, donating assets or spreading gains across years. These strategies may help improve after-tax returns in taxable portfolios.

A capital gain occurs when you sell an asset for more than you paid for it. Capital gains planning matters most in taxable accounts. It’s especially important if you hold company stock or investments with large gains.

Consider discussing these options with your professionals to determine which may be appropriate for your situation:

• Spread a sale over two years. If it’s practical for you, sell only a portion of your appreciated assets one year and the remainder the following year.
• Coordinate gains with income years. Realize gains in years when your taxable income is lower.
• Donate appreciated assets to charity. You may avoid the capital gains tax and, in many cases, claim a deduction for the fair market value of those assets.
• Take advantage of tax loss harvesting. Use market losses to offset some of the gains your assets see over the course of the year.
• Invest gains in Opportunity Zone funds. Shift money to qualified funds for disadvantaged communities to defer or potentially reduce the tax you owe.

Mini-scenario: Suppose you sell one investment for a $15,000 gain and another investment in your portfolio has declined by $7,000. Selling the second investment may allow you to use that loss to offset part of the gain, reducing the amount subject to capital gains tax.

Watchpoint: Be mindful of the wash-sale rule. If you sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the IRS may disallow the loss for current tax purposes.

6. Consider bunching itemized deductions

Bunching means grouping expenses into one year so your deductions may exceed the standard deduction. This strategy can be useful for charitable giving, medical expenses and other deductible costs.

The standard deduction has increased over time, which means fewer taxpayers itemize. Bunching can make itemizing worthwhile in some years. In other years, you can take the standard deduction.

Common itemized deductions include:

• Qualified mortgage interest
• Investment interest on net investment income
• Certain medical and dental expenses
• Qualified charitable contributions

Quick example: Let’s say you’re considering itemizing medical expenses. If your expenses in a given year aren’t high enough to make itemizing worthwhile, you might delay some costs so they fall into the following year. Grouping expenses in this way may increase the likelihood that itemizing provides a benefit when combined with your other deductions.

Mini-scenario: If you typically give $10,000 to charity each year but otherwise don’t itemize, you could consider giving two years of planned donations in one tax year. That may help you exceed the standard deduction in that year, then take the standard deduction the following year.

A donor-advised fund can add flexibility to charitable bunching. You may be able to make a larger tax-deductible contribution in the bunching year, then recommend grants to qualified charities over time. Donor-advised funds may also support donations of appreciated securities, which can help reduce capital gains exposure while funding your giving goals.

Watchpoint: Review donor-advised fund fees, investment options, grant rules and substantiation requirements before you contribute.

7. Use annual gifting as part of your estate plan

Annual gifting can help transfer wealth to family members or others while reducing your taxable estate over time. Gifts up to the annual exclusion amount generally don’t use your lifetime estate and gift tax exemption.

The annual exclusion lets you give a set amount to multiple people each year without using your lifetime exemption. Gifts more than the annual exclusion amount will reduce your available lifetime estate tax exemption.

Strategic gifting can support education, home purchases, long-term investing or other family goals. It can also become part of a broader estate planning approach that includes trusts, beneficiary designations and legacy planning.

Mini-scenario: A married couple with three adult children may be able to make annual exclusion gifts to each child. If spouses both give, they may increase the amount transferred out of their estate while helping family members fund meaningful goals.

Watchpoint: Direct payments to a qualified educational institution for tuition or directly to a medical provider for qualified medical expenses may be treated differently from annual exclusion gifts. Ask your tax professional how these rules apply before you make a payment.

Common tax planning mistakes to avoid

Effective tax planning often comes down to timing, documentation and coordination. These common mistakes can limit options or create avoidable surprises:

• Waiting until tax filing season to plan. By April, many deadlines have passed. Build in spring, summer, fall and winter check-ins.
• Focusing only on federal taxes. State income taxes, local rules and state-specific deductions can change the outcome.
• Ignoring how one move affects another. A Roth conversion, capital gain or bonus can affect tax brackets, Medicare premiums, credits and deductions.
• Missing contribution deadlines. Workplace retirement plan contributions generally have different deadlines than IRA and HSA contributions.
• Forgetting estimated taxes. If you have self-employment income, investment income or a large one-time gain, you may need quarterly estimated payments.
• Not keeping records. Save receipts, gift confirmations, cost basis records, medical expense documentation and charitable acknowledgment letters.
• Letting taxes drive your decisions. Tax efficiency matters, but it shouldn’t override your broader investment strategy, cash flow needs or long-term plan.

Your year-round tax planning checklist

Stay organized and avoid the spring scramble by following this strategic timeline.

Spring: post-filing

• Review your completed return for surprises, missed deductions or planning opportunities.
• Adjust your W-4 if you receive a large refund or owed a large balance.
• Organize your tax documents from the filing you just completed.
• Set up automatic contributions to your IRA, HSA or 401(k) for the new year.
• Share major life changes with your tax and financial professionals.

Summer: mid-year check-in

• Review your income so far and estimate any expected bonuses.
• Check your FSA balance and plan eligible spending before deadlines.
• Review estimated tax payments if you’re self-employed or have investment income.
• Make sure your giving, education savings and retirement contributions are on track.
• Keep receipts for summer day camps, which may qualify for the Child and Dependent Care Credit.

Fall: planning phase

• Estimate your tax liability for the year.
• Review your investment portfolio for tax-loss harvesting opportunities.
• Plan any end-of-year charitable contributions.
• Consider whether bunching deductions may make sense.
• Discuss Roth conversion opportunities before year-end pressure builds.
• Review annual gifting plans with your tax and estate planning professionals.

Winter: action time

• Complete all 401(k) contributions by year end.
• Make final 529 plan contributions, if applicable.
• Execute Roth conversions.
• Take RMDs, if applicable.
• Complete annual exclusion gifts by year end.
• Gather year-end pay stubs, investment statements and charitable receipts.

Documents to gather for better tax planning

Having the right information readily available can lead to more productive conversations. Keep these records organized throughout the year:

• Most recent federal and state tax returns, year-to-date pay stubs, W-2/1099/K-1 documents
• Brokerage statements and cost basis records
• Retirement, HSA/FSA and dependent care account statements
• Mortgage interest and property tax records
• Charitable gift receipts and acknowledgments letters
• Medical/dental expense receipts
• Estimated tax payment records
• Business income and expense records, if applicable
• Education expense records and 529 plan statements, if applicable
• Estate planning documents and gifting records

Frequently asked questions

Who benefits most from year-round tax planning?

Year-round tax planning helps anyone who wants fewer surprises at tax time. It’s especially useful if you have variable income, self-employment income, investment gains, rental property, equity compensation, charitable goals, retirement income needs or estate planning priorities.

How often should I review my tax strategy?

A quarterly review helps you stay on track. At a minimum, review your tax strategy after filing, at mid-year and again in the fall before major year-end deadlines.

What are the most effective tax planning strategies for high earners?

High earners often focus on maximizing retirement account contributions, managing capital gains, using tax-loss harvesting, coordinating charitable giving, and evaluating Roth conversions before shifting to estate planning strategies.

Partnering with a financial professional can help ensure these strategies are consistent with your long-term financial goals.

Can a financial professional help with tax planning?

While a financial professional can’t provide tax advice, they can help you understand how taxes, investments, retirement income, charitable giving and estate planning work together. They can also coordinate with your tax professional to help align tax decisions with your broader financial plan.

How can I reduce taxable income before year-end?

You may be able to reduce your taxable income by increasing contributions to your retirement accounts, contributing to an HSA, harvesting investment losses, bunching deductible expenses or making qualified charitable gifts.

Your options depend on income, account eligibility, timing and current tax rules.

How can I reduce taxes on investments?

Common strategies include tax-loss harvesting, holding investments long enough to qualify for long-term capital gains rates, donating appreciated assets, spreading sales across tax years and placing investments in accounts that match their tax profile. Review investment moves in the context of your broader financial plan.

How can an inheritance affect taxes?

An inheritance can affect tax planning through retirement account distribution rules, real estate decisions, cost basis, and income timing. Before selling inherited assets or taking distributions, confirm the tax rules that apply to each asset.

Inherited investments or property may receive a stepped-up basis, which can affect future capital gains if you sell. Inherited retirement accounts require close attention because distribution timelines can vary based on your relationship to the original account owner and the type of account.

Before you take distributions, sell inherited assets or combine inherited funds with your broader portfolio, coordinate with estate, tax and financial professionals. The right sequence can help you manage taxes and align the inheritance with your long-term goals.

Partner with a financial professional

Tax planning works best when it’s part of your full financial plan. A financial professional can help you weigh trade-offs, work with your tax professional and align tax decisions with your investment, retirement, charitable giving and estate planning goals.

With a little planning each year, you can take a more proactive approach to taxes.

Learn how our integrated approach to wealth planning can help you see the full picture of your financial life.