For Americans, tax time usually tends to be the last thing they are thinking about in the months of August or September. Instead, the waning days of summer, the slow but noticeable difference in cooler days signal the last opportunities for vaction or the shift to Fall season, depending on location. However, the beginning of the last quarter of the calendar year is also one of the best time to prepare, adjust and anticipate probable income tax situations, including crypto.
Harvest Your Losses
It's been a long path since 2019 when the IRS issued it's key memo on the taxability of crypto and airdrops. Since that time, crypto trades have become far more like stock trades for capital gains taxation, and airdrops are as rare as a gem in a gem field in Arkansas. In short, stability has produced predictability, which is good for tax preparation. Just like taxes, if folks know they have losers, right now through December is a good time to let go of those losses and use them as an offset to big gains made earlier in the year. Even under capital gains taxes, it reduces possible tax liabilities for profits made. However, remember, wash sales don't count. You can sell, score a loss, and then rebuy shortly after. It has to be a true liquidation.
Stuff the IRA
On the retirement side, there's still plenty of time to add to IRA accounts between now and April, but the window of planning for the next six months could be used to maximize those deposits if the earlier half of the year was a bit stingy. Remember, Roth IRA money grows without taxes on profits afterwards. Traditional IRA money defers taxes until a withdrawal time that ideally has you earning less paycheck income, which means you're in a lower tax bracket on the withdrawal when you do make it. So the more you stuff away now, the bigger your retirement options later.
Keep Track of Interest Income
This has been a bit of a banner year for CDs and bank deposit accounts paying very good interest on savings, but that interest comes with a cost. It adds to income taxed at the end of the year. Be careful your CDs or similar don't bump you into a more expensive tax bracket if you're on the edge. Avoid liquidations this year if that's the case. Let the CD rollover to another year instead.
Get Your Solar Before the Lights Go Out
Thinking about a solar change to your home? Better do it now before December. Most big solar tax credits go away after 2025. Right or wrong, the steep discounts people got in previous years for adding solar panels, buying EV cars or swapping out gas water heaters for heat pumps will be far more expensive in 2026 and without tax benefits.
Take Advantage of Time
With a good three and half months left before the end of the year, this is the best moment to make changes that take a bit of time to put into place. It's almost useless trying to make tax changes in the last two weeks hoping to get anything done, especially during the holidays. Do a bit of planning, assess your accounts in an annual housekeeping move, trim your losers and reposition your winners. You'll have a better grip on your current status, and your tax situation will thank you for it later in the Spring.
The above is not financial advice, just musings of possibilities people should consider before their tax filings are due next year.
