Curated by: Rubric Advisors
Tax Planning
Year-Round Tax Planning
Why proactive tax planning throughout the year beats a reactive approach at filing time, and the key strategies to review each quarter.
Year-Round Tax Planning
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Why Year-Round Planning Matters
- Most tax-saving opportunities expire on December 31 and cannot be captured retroactively at filing time
- Proactive planning throughout the year can reduce your effective tax rate by optimizing the timing of income and deductions
- A reactive approach often leads to missed opportunities for Roth conversions, harvesting, and charitable giving
- Coordinating with your financial advisor and CPA during the year produces significantly better outcomes than April surprises
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Full Guide
Why Year-Round Planning Matters
- Most tax-saving opportunities expire on December 31 and cannot be captured retroactively at filing time
- Proactive planning throughout the year can reduce your effective tax rate by optimizing the timing of income and deductions
- A reactive approach often leads to missed opportunities for Roth conversions, harvesting, and charitable giving
- Coordinating with your financial advisor and CPA during the year produces significantly better outcomes than April surprises
Q1: Set the Foundation
- Review your prior year return to identify planning opportunities and adjust withholding for the new year
- Confirm 401(k) contribution elections, HSA funding, and mega backdoor Roth setup with your employer
- Estimate your expected income for the year including bonuses, RSU vests, and any asset sales
- Set up quarterly estimated tax payments if you have significant income not subject to employer withholding
- Establish a tax-loss harvesting watch list for your taxable investment accounts
Q2-Q3: Mid-Year Check-In
- Compare actual income and withholding against your annual projection to catch any shortfalls early
- Review realized capital gains from RSU sales, option exercises, or portfolio rebalancing year to date
- Execute tax-loss harvesting in your taxable accounts during any mid-year market pullbacks
- Model a Roth conversion to determine the optimal amount to convert based on your projected tax bracket
- Assess whether bunching charitable deductions into the current year versus next year produces a better result
Q4: Year-End Optimization
- Finalize tax-loss harvesting before December 31, being mindful of the 30-day wash sale rule
- Make charitable contributions of appreciated stock or fund a donor-advised fund before year end
- Accelerate or defer income if you expect a meaningful change in your tax bracket next year
- Confirm all retirement account contributions are maximized including 401(k), IRA, and HSA
- Review your estimated tax payments and adjust your final Q4 payment to avoid underpayment penalties
Estimated Tax Payments
- Quarterly estimated payments are due in April, June, September, and January of the following year
- You must pay at least 100% of last year's tax or 90% of current year tax to avoid underpayment penalties
- High earners with AGI over $150,000 must pay 110% of prior year tax through safe harbor provisions
- Increasing W-2 withholding in Q4 can be more effective than a lump sum estimated payment for penalty avoidance
- Use your mid-year projections to right-size payments rather than relying on last year's figures alone
Key Takeaways
- Treat tax planning as a year-round discipline with quarterly reviews rather than an annual filing exercise
- Project your income, gains, and deductions early in the year and update those projections each quarter
- Coordinate tax-loss harvesting, Roth conversions, and charitable giving with your overall financial plan
- Ensure estimated tax payments and withholding are sufficient to avoid penalties and April cash flow surprises
- A team approach with your financial advisor and CPA working together produces the most tax-efficient outcomes
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