Punxsutawney Phil saw his shadow Monday, which means Americans will be forced to endure six more weeks of Winter. Nevertheless, advisors say they need to start thinking about Spring, specifically Tax Day on April 15th, because it’s going to be here before they – or even Phil - knows it.
When it comes to a smart tax move to make now for 2026 and beyond, Heather Rivas, CPA and wealth advisor at River Wealth Advisors, says projecting cash flow needs and taxable income several years ahead, particularly when approaching retirement, allows for more effective multiyear tax planning. She adds that it also helps identify periods where after-tax savings can cover expenses without creating taxable income.
“Those income gaps can be used strategically for Roth conversions or tactical retirement account drawdowns, making it especially valuable to maximize Roth contributions or to consider backdoor Roth contributions for those in the Roth IRA income phaseout,” Rivas said.
Furthermore, advisors can take advantage of maximizing contributions to tax-advantage accounts, including employer matching contributions, Health Savings Accounts (HSA), and workplace retirement plans such as a 401(k), which shelters income in high tax years, according to Rivas.
“Most HSA plans allow for investment and growth, which generates a valuable source of funds in retirement,” Rivas said.
Meanwhile, Bradford Houchins, senior VP and wealth advisor at River Wealth Advisors, says it’s a good time for advisors to revisit charitable giving strategies, such as utilizing a Donor-Advised Fund to bundle multiple years of giving into one high-income year or using Qualified Charitable Distributions from an IRA account to help lower taxable income.
“Advisors can look for opportunities to maximize deductions by leveraging new provisions in the One Big Beautiful Bill Act, including tax-efficient income planning to help taxpayers age 65 and older qualify for the full Enhanced Senior Deduction, along with the ability for each filer to deduct up to $1,000 in cash charitable donations, potentially generating up to $14,000 in additional deductions without itemizing,” Houchins said.
ABOUT THOSE ROTH CONVERSIONS
When considering Roth conversions, Rivas says careful consideration should be given to current and future marginal tax brackets. In her view, excessively large conversions could result in the investor paying a higher marginal tax rate than would be the case if the strategy were deployed over multiple tax years.
“For investors nearing Medicare age, it’s important that advisors consider the implications of Roth conversions on their MAGI and Medicare premiums under IRMAA. A carefully scaled and timed multi-year conversion strategy can be a powerful way to minimize tax for investors and their beneficiaries,” Rivas said.
Meanwhile, Houchins points out that for those considering Roth conversions, it can be tax-advantageous to convert when core long-term holdings are down or during a market correction, because converting at a lower valuation reduces the tax cost while allowing future recovery to grow tax-free in the Roth. The current pressure on technology names may present a good opportunity for investors to consider an "in-kind" conversion.
“Incorporating charitable giving strategies can be a great way to both maximize the amount converted within a marginal tax rate cap target and preserve tax benefits that phase out as taxable income rises,” Houchins said.
TAKING CARE OF IRA CONTRIBUTIONS
As for how clients take advantage of 2025 IRA contributions prior to April 15, 2026 to potentially lower their tax liability, Rivas says they have the potential to make IRA and/or Roth IRA contributions for the 2025 tax year up to the filing date of their 2025 taxes.
“Because the ability to make contributions remains available up to the filing date, taxpayers on extension periods can use that time to evaluate their options. These contributions generally apply to individuals who are not covered by workplace retirement plans,” Rivas said.
Finally, Houchins points out that if clients are unsure about their ability to make contributions, this can be confirmed when their taxes have been prepared. Contributions can then be reflected on their returns and made in advance of filing their taxes.
“If their adjusted gross income is over the phaseout amount, which is $236,000 to $246,000 for joint filers in 2025, they could consider back-door Roth contributions. While this strategy does not provide a current-year deduction, Roth investments provide solid long-term tax benefits,” Houchins said.
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