Tax Strategies You Might Be Missing Out On

 

While you might have finished filing your tax returns, it’d be a mistake to file them away without a second thought. Making your tax burden less of a burden is best explored with year-round collaboration with your Baird Financial Advisor team. Here are some strategies that you might want to consider.

Maximize Your Retirement Plan Contributions

Contribution limits for retirement can change from year to year, so make sure you adjust your savings accordingly. For example, employees with a 401(k) can now save more in 2025, and those between the ages of 60 and 63 have an additional opportunity. Even if you’re not maxing out your 401(k), be sure to save enough to trigger an employer match, if that benefit is available.

	2024	2025	Increase
401(k) Contribution Limit	$23,000	$23,500	$500
401(k) Catch-Up (Age 50+)	$7,500	$7,500	$0
401(k) Super Catch-Up (Age 60-63)	N/A	$3,750	$3,750
IRA Contribution Limit	$7,000	$7,000	$0
IRA Catch-Up (Age 50+)	$1,000	$1,000	$0
HSA Contribution Limit*	$4,150 / $8,300	$4,300 / $8,550	$150 / $250
HSA Catch-Up (Age 55+)	$1,000	$1,000	$0
QCD Contribution Limit	$105,000	$108,000	$3,000
Standard Deduction**	$14,600 / $29,200	$15,000 / $30,000	$400 / $800

*Individual / family coverage **Single / married filing jointly

In many instances, the amount you can save for retirement or deduct from your taxes has increased for 2025 – make sure you keep up with these changes in your own plans.

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If you’re contributing funds to a health savings account, know that those contribution limits have also increased in 2025, providing you an opportunity to pay for medical expenses in retirement without dipping into other retirement accounts. 

Put Your Charitable Contributions To Work

While most charitable contributions are made in cash, that’s not your only option. For example, gifting appreciated stock that you’ve held for more than 12 months to a charity or donor-advised fund allows you to deduct the full value of the investment (and, potentially lowering your taxable income) without having to pay any capital gains tax on the appreciation. This strategy can be especially useful if you believe the underlying investment will continue to grow: By gifting shares that have appreciated but then buying additional shares, you could reduce your tax burden should you decide to sell in the future.

If you are age 70½ or older and own an IRA, you might consider giving to charities through a qualified charitable contribution. While IRA distributions are generally taxable, QCDs allow you to make tax-free distributions directly from your IRA trustee to qualified charities – and if you’re age 73 or older, these gifts count toward your IRA’s required minimum distribution for the year. Better yet, in 2025, the amount you can contribute as a QCD has been increased, allowing an opportunity to further maximize your charitable giving strategy.

Bunching deductions is a planning strategy that increased in popularity following 2017’s Tax Cuts and Jobs Act, which limited or eliminated many existing itemized deductions while also doubling the standard deduction. Those who can control the timing of their charitable contributions might benefit from deferring a year’s worth of giving to the following year, taking the standard deduction one year and doubling the amount to charity the following year (when they would then itemize). This strategy may be especially pertinent this year, as the Tax Cuts and Jobs Act is scheduled to sunset certain provisions – including the higher standard deduction – at the end of 2025. With the standard deduction amount slated to fall precipitously in 2026, you might consider deferring charitable contributions from 2025 to 2026, when they may provide greater tax savings.

Consider Strategies To Minimize Capital Gains

While we all want to see our portfolios continue to grow, that growth is usually accompanied by a bigger tax bill when it’s time to sell. Tax loss harvesting lets you “harvest” your underperforming investments to mitigate the capital gains impact of your winners. If you find yourself with significant unrealized capital gains, your Baird Financial Advisor has access to tax-smart investment solutions that can capture losses and manage risk as you grow and preserve your wealth.

Also, while converting a traditional IRA to a Roth IRA can bring about significant tax savings, converting it all at once might push some of that income into a higher tax bracket. One strategy to keep your tax cost lower is to convert enough to maximize your current tax bracket without crossing into the next one. A downturn in the market can also be an opportune time to make the conversion: You’ll essentially be able to convert a larger portion of your portfolio at a lower tax cost; if and when the market rebounds, you'll get tax-free growth on the money you converted. Your Baird Financial Advisor can help map out various scenarios when a Roth conversion might create the biggest tax benefit for your overall plan.

Scenarios such as these are why we feel tax planning is a year-round affair. Consider sharing your newly completed tax return with your Baird Financial Advisor, and together you can uncover tax-smart planning and investment opportunities that make the most of your wealth over the years to come.

In a recent Baird client survey, 71% expressed an interest in learning how the changing tax landscape could impact their own plans.

Sharpen Your Wealth Planning With Tax Expertise

Most major financial decisions you make will have a tax impact, from buying a stock to selling a house. But life events outside your financial decision-making can also influence your larger tax strategy. Ask yourself:

• Has there been a change in your family? Marriage, divorce, children and widowhood can affect both your filing status and your estate planning decisions.
• Have you changed jobs? Switching employers, retiring or starting or selling a business can potentially influence your capital gains and tax deductions.
• Have you moved? Different states have different sets of laws, and the timing of your move can impact your planning.
• Have tax laws changed, or has the market dipped unexpectedly? Even if your life has remained relatively stable, small changes in the markets or in state or federal tax law can have a big impact on your tax liability.

That is why we recommend sharing a copy of your newly completed tax return with your Baird Financial Advisor team. Your tax return offers your advisory team a window into your finances, letting them identify strategies to manage your future tax cost as well as model different scenarios to meet your financial goals while boosting your after-tax return.

The information offered is provided to you for informational purposes only. Robert W. Baird & Co. Incorporated is not a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.