1.Convert a traditional IRA or 401(k) plan into a Roth IRA
Since, Roth accounts provide tax-free earnings, tax-free withdrawals and no required minimum distributions (RMDs) after you reach a certain age, converting traditional IRA or 401(k) to Roth IRA is the first moves for year-end tax planning.
What you need to weigh, however, is that the contributions to Roth plans are nondeductible, so take into account the future benefits of a Roth against the loss of current deductions. Further, for those people whose retirement account value has gone down, there lies an opportunity to minimize the tax cost of a conversion. Add to that a scenario that if your income this year has put you into a lower tax bracket, the cost may decrease even further
2.Rid yourself of bad investments
If you have earned capital gains, try to sell loss-making investments so as to offset against capital gains you realized earlier in the year. If you end up with a net loss, you can use it to offset up to $3,000 in ordinary income, such as wages or interest. This strategy is, popularly known as Loss Harvesting.
What you must remember however is that if you buy back the same investment or substantially identical security within 30 days before or after the loss generating investment, it will be disallowed for tax purposes.
3.Charitable stock contributions
Charitable contributions give you a tax deduction. So, it is good tax planning that you donate the stocks that have appreciated and you planned to sell it. Thus you will not only avoid taxes on gains if you sell but also you will be able to claim a charitable deduction equal to the stock’s market value.