5 Tax Moves You Should Make During the Holiday Season
Written by
Kerra Bolton
Edited by
Amen Oyiboke
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The holiday season is a time to make strategic moves that will help you end the year on a financially savvy note.
“Summer travel season is over, and we’re heading into the busy holiday season,” said Armine Alajian, founder of the Alajian Group Inc. “However, there’s still time to make a few smart money moves before the year ends and the new tax season begins.”
From leveraging holiday gifting to maximizing business write-offs on seasonal expenses, the holidays offer opportunities to reduce one’s tax burden while advancing one’s financial goals.
Here are five tax moves you should make during the holiday season.
Take Stock of Your Finances
Reviewing your finances during the holiday season, rather than waiting until January or even April, is one of the smartest moves you can make.
“Early December is a good time to check in with your tax accountant, before family commitments and office closures start happening, and before their office gets busy with the new tax year,” Alajian said.
Li Han Tan, the co-founder of W.L.P Group & Academy, recommended using the holiday season to create a checklist of income sources and deductions.
“Set aside time to update records, such as tracking charitable contributions, which often spike during this season,” Tan said.
Gift Your Family
Giving money or other sizeable assets to family members allows you to receive an exemption from federal estate and gift taxes.
The federal government allows taxpayers to give up to $18,000 per family member, and the lifetime exemption is $13.6 million, said Ryan Zabrowski, senior portfolio manager and CFP at Krilogy.
“Your spouse can also gift up to the same amount, even to the same people,” Zabrowski said. “This means that a married couple can shield a total of $27.2 million without having to pay any federal estate or gift tax. That’s a big deal.”
Zabrowski said you could also use holiday monetary gifts to help defer income to the following year if it minimizes your current tax liability.
“You may also be able to minimize your federal income taxes by shifting some income to family members who are in a lower tax bracket,” he explained.
Deduct Holiday Business Expenses
Holiday-related business expenses, such as client gifts (up to $25 per recipient), office parties, and seasonal marketing campaigns, are tax-deductible.
Remember to keep detailed receipts and documentation to substantiate these deductions, Tan said.
In addition, the holiday season is ideal for business owners to purchase equipment or technology upgrades.
“Section 179 deductions allow businesses to deduct the full purchase price, providing significant tax savings before year-end,” Tan said.
Engage In Tax-Loss Harvesting
Tax experts said the holidays are a strategic time to sell underperforming investments for tax-loss harvesting. The strategy can offset capital gains or up to $3,000 of ordinary income while reducing your tax burden.
In addition to helping you meet year-end IRS deadlines, tax-loss harvesting during the holiday season gives taxpayers a complete snapshot of their income, realized capital gains, and tax liabilities.
“You can take advantage of tax-loss harvesting to gain a one to two percent annual net worth increase merely by owning individual stocks instead of an index,” Zabrowski said. “And you can enjoy this ‘virtual dividend’ indefinitely. Projected over a lifetime, tax loss harvesting by itself can double your net worth.”
Gift Yourself Financial Stability
Finally, remember to give to yourself, suggested Melissa Pavone, founder of Mindful Financial Partners.
“The holiday season isn’t just about giving to others,” Pavone said. “It’s an opportunity to give yourself the gift of a strong financial future. By implementing these tax-smart strategies, you can enter the new year in a better position to achieve your financial goals while enjoying the joy of the season.”
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