Gifts That Keep on Giving (and Saving)

Our 2 Cents – Episode #237

Gifts That Keep on Giving (and Saving)

It’s the most wonderful time of the year! On today’s episode of Our 2 Cents, the Lewits share fun financial gifting ideas and end-of-year tax strategies. Listen now!

1. Best Financial Gifts for Grandkids:
   • Skip the toys this year—give your grandkids a gift that keeps on giving (literally).
2. Year-End Tax Moves:
   • Ring in the new year right by making these tax moves to help lower your 2025 bill.

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Podcast Transcript

Announcer: You’re listening to Our 2 Cents with the team from SGL Financial, Building Wealth for Life. Steve Lewit is the president of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.

Gabriel Lewit: Well, hello everybody. Welcome to Our 2 Cents. It is a beautiful day here in the neighborhood. You’ve got Gabriel Lewit and Steve Lewit on the microphones.

Steve Lewit: Mister who was it?

Gabriel Lewit: Rogers?

Steve Lewit: Mister Rogers.

Gabriel Lewit: Or whatever.

Steve Lewit: “It’s a great day in the neighborhood, kids.”

Gabriel Lewit: Yeah. It’s a beautiful winter day. Although, someone told me the other day it’s still not even winter yet. They said it’s still technically fall.

Steve Lewit: Is that right?

Gabriel Lewit: Until December 20th or something like that,

Steve Lewit: That’s so depressing.

Gabriel Lewit: And I was saying, “Well, it sure feels like winter.”

Steve Lewit: It looks like winter.

Gabriel Lewit: Yeah, Katie and I, actually, we have a chief technical officer that advises us on computer items and projects and technology and things that we work with, and he was traveling. He actually lives out in California and he came over to visit us, and he was just shocked by the snow here. And it just reminds you that, yeah, some of our listeners might be sitting in sunny California or in a desert in Palm Springs, Arizona, or something like that while we’re talking about winter here and probably laughing at us.

Steve Lewit: Well, they don’t even know what snow is.

Gabriel Lewit: Yeah.

Steve Lewit: I mean, a lot of them never experience snow.

Gabriel Lewit: But we are having some snow this year-

Steve Lewit: We certainly are.

Gabriel Lewit: … just so you’re aware. And you can be in the snow here with us.

Steve Lewit: Yes. And it is white and fluffy and cold.

Gabriel Lewit: And melting now.

Steve Lewit: And melting.

Gabriel Lewit: At least for now.

Steve Lewit: Well, more is coming, I assure you.

Gabriel Lewit: All right.

Steve Lewit: So, what do you got for us?

Gabriel Lewit: Well, last time we talked about shiny object syndrome, Birkin bags, the Dells giving a couple billion away, no sweat, to kids for their Trump accounts.

Steve Lewit: Yes.

Gabriel Lewit: Lots of interesting topics on the last show if you didn’t get a chance to catch it. And we also talked a little bit about financial gimmicks, shiny object syndrome, things that you should pay attention to when you’re out there looking at things or try to ignore, in fact-

Steve Lewit: Especially now if you’re doing Christmas shopping or holiday shopping.

Gabriel Lewit: Yeah, so we covered a lot last week. We’re going to continue in a little bit of a Christmas theme this year… Or sorry, this year. This show. Sorry.

Steve Lewit: That’s okay. I know where you are. I got you.

Gabriel Lewit: … with the five best financial gifts for grandkids.

Steve Lewit: I got you covered. Don’t worry about it.

Gabriel Lewit: Okay. So we’re going to do the five best financial gifts for grandkids.

Steve Lewit: Yeah, like that.

Gabriel Lewit: Yep.

Steve Lewit: Are you sending a message to me?

Gabriel Lewit: And also … Not at all.

Steve Lewit: Folks, this is a personal message to me coming your way from Gabriel.

Gabriel Lewit: And how to make your first retired Christmas merry and bright. Okay?

Steve Lewit: Nice. Nice.

Gabriel Lewit: And then to round things out, we’re going to talk about some year-end tax moves. So by the time you hear this show, you’ll still have a couple weeks before year-end. So if some of these things pique your interest here and you haven’t done these things yet, the good news is you’ll still have time to be able to take care of these before the end of the year is upon us.

Steve Lewit: Yeah. So I’m looking forward to hearing how bad of a grandfather I am, Gabriel. Why don’t you start us off. And I don’t know if I’ll agree.

Gabriel Lewit: Yeah. Yeah. Well-

Steve Lewit: We’ll see.

Gabriel Lewit: … let’s go through that one first. Okay. So you’ve got grandkids. You want to give them something more than just the next hot video game or Labubu. If you’ve listened to our shows, we’ve talked about those. Or a Birkin bag.

Steve Lewit: Or a Birkin bag.

Gabriel Lewit: You shouldn’t give that to your grandkid either.

Steve Lewit: A child Birkin bag.

Gabriel Lewit: Yeah, you don’t want to do that. Okay, so what could you give them that’s more financially oriented? Well, one of the easiest ones that always comes to mind is a 529 plan.

Steve Lewit: Yes.

Gabriel Lewit: You might be thinking, “Well, isn’t that for college?” Oh, you’d be right. And if you have grandkids that are anywhere from one month old up to 17 years old, you could fund money in a 529 plan for them for the purposes of funding their college, which of course is getting more and more expensive each and every year.

Steve Lewit: And it is the go-to choice by most grandparents and parents, is to throw money into a 529 plan because it’s very compelling.

Gabriel Lewit: Yeah. Average universities, private universities, are costing $45,000.

Steve Lewit: That’s the average.

Gabriel Lewit: For a private university.

Steve Lewit: Yeah.

Gabriel Lewit: Yeah, per year. Up from, well, $12,000 for a public university. Well, these are actually surprisingly a little lower than I thought.

Steve Lewit: This is very low. I’ve never seen these numbers.

Gabriel Lewit: Yeah. But the key thing here is that they aren’t going to be any cheaper in 16, 17, 18 years when those grandkids, depending how young they are, are heading off to college in the future.

Steve Lewit: They’ll easily double or triple.

Gabriel Lewit: Yep.

Steve Lewit: Yeah. But most of the college costs that I’ve seen start at $45,000, and go up to $110,000, $120,000 if you’re going to an Ivy League school. And that’s kind of a big ticket to pay for that most people can’t afford.

Gabriel Lewit: Yeah. No, I had a client, this is a true story, about two weeks ago, we were talking about, “Hey, what do you want to fund for your kid for college?” It was a kid, not a grandkid. “Oh, well, we want to make sure he can go to any school of his choosing and we want to pay for a full ride, and we want to have enough saved up for that.” And I said, “Okay, so any school of his choosing, you mean like private Ivy League or private regular or …?” No, yeah, if he wants to go to Yale or Cornell or Carnegie Mellon, we’d want to be able to fund that.” So I said, “Well, you’d probably need to have like $600,000, $700,000.” And he was like, “Well, I was thinking even more, like $800,000, $900,000 saved up.”

Steve Lewit: Wow, well, good for him, because there’s a lot of people are thinking maybe $300,000, $400,000.

Gabriel Lewit: Very rare for me to encounter somebody that is that gung ho about saving for college and actually understands how much that could really cost if their son, in this case son, wanted to go to such an expensive school and they wanted to have a full ride.

Steve Lewit: And the other question which we’re not going to discuss today is, is it worth it?

Gabriel Lewit: Yeah, that’s a whole other horse of a different color. So let’s say you’re a grandparent, you know that your grandchild would like to go to maybe a very nice school. What can you do? You give some money to a 529 plan. And you can even get yourself a little bit of a tax write-off if you do that in your home state. And generally is a very popular way of saving for college, and the sooner you start, the more money will be there down the road.

Steve Lewit: Yes. Now understand this, folks, if you do a 529 plan, that money counts on the FAFSA form against getting any financial aid because it’s considered the student’s money. Did you want to comment on that?

Gabriel Lewit: Yes, there is more to it than that. There are different counting calculations for grandparent-owned 529s and parent-owned 529s.

Steve Lewit: Oh, this is if the grandparent owns it?

Gabriel Lewit: No, it’s actually not counted at all anymore, is what I believe is the newest update to the law.

Steve Lewit: Really? Can we-

Gabriel Lewit: Where parent-owned 529s are actually still counted, and then that’s counted less than assets owned directly by a kid, like in an UTMA account, which we’ll talk about. So yes, grandparents owning 529. But as a recent tax law change, it now no longer counts at all, it’s much more favorable.

Steve Lewit: Well, I guess that’s because you have little kids that are going to go to college, and my last one is just graduating. So I don’t worry about that anymore.

Gabriel Lewit: Yeah. Yeah. Oh, yeah.

Steve Lewit: We’ll check that out and make sure, folks.

Gabriel Lewit: Well, yes, I’m 99% confident level on that.

Steve Lewit: I bow to your wisdom.

Gabriel Lewit: Okay. Well, let’s go ahead and talk about the … The whole goal wasn’t to talk just 529s. Other financial gifts, you could gift a Roth IRA contribution. What do I mean by gifting a Roth IRA contribution? Well, your grandkiddo has to have some earned income. They could do babysitting, they could do a paper route, they could mow lawns, as long as it’s legitimate income. Let’s say they made $1,500 or $2,000 last year. Or this year, sorry, it’d be this year. They could, in theory contribute to a Roth IRA because they have earned income and they could do so at 14, 15, even 16 years old. Now, will your grandchild be opening up their own Roth IRA with their $2,000 babysitting money to fund their retirement?

Steve Lewit: No.

Gabriel Lewit: I’m glad you answered that correctly.

Steve Lewit: I was on top of that one.

Gabriel Lewit: That was a winning answer. Yeah, no, they’re probably not thinking that. They’re thinking about the next hot sweatshirt that’s trending or whatever’s … Hoodie, little cool bag or makeup, whatever they’re into, not retirement at 14 years old. So you, grandparents that know about retirement, could fund this for them. You just gift them, or probably their parents, the money that is supposed to go into a Roth IRA. You work with us, we can open up the Roth IRA, we fund it, we give you a little bit of tips just for making sure it’s documented. And then voila, your 14-year-old has a Roth IRA, or 15-year-old, Roth IRA funded for retirement in 50 years from now. And that has a tremendous amount of time to grow 100% tax-free.

Steve Lewit: And tax-free is a big deal. So when these kids retire, they’re going to have a bunch of money that is going to be very meaningful to them that is not meaningful to them today.

Gabriel Lewit: Yeah. Now, if you want to talk about a gift that really means something down the road, we did this example last time on the show for some other calculations. Let’s do it again here. Let’s say your grandson or daughter earned $7,000 this year and you max out a Roth IRA for them and they’re, I’m going to say 15 years old for easy math. So there’s 50 years until they would retire at 65. So let’s just use that rule of 7.2 we had talked about last time, where at a 7.2% interest rate money doubles every 10 years.

Steve Lewit: Yes.

Gabriel Lewit: Probably would grow even higher than that or should.

Steve Lewit: Should.

Gabriel Lewit: But let’s say $7,000 doubles for the first 10 years. Equals what? $14,000. Doubles on the second 10 years.

Steve Lewit: $28,000.

Gabriel Lewit: Equals $28,000. Doubles on the next 10 years.

Steve Lewit: $56,000.

Gabriel Lewit: $56,000. We’re at 30 years. Doubles again at 40 years.

Steve Lewit: $112,000.

Gabriel Lewit: $112,000. Doubles again at 50.

Steve Lewit: $224,000.

Gabriel Lewit: $224,000. So your gift of $7,000 to fund your 15-year-old’s Roth IRA just gave them a $224,000 headstart on retirement, 100% tax-free on the low end.

Steve Lewit: Yeah. No, imagine if he did that every year for 10 years.

Gabriel Lewit: Yes. It’s incredible.

Steve Lewit: Now you’ve given your kids a retirement fund, no interest at algorithm.

Gabriel Lewit: Millions of dollars of tax-free money by the time they’re even out of college, with a grand total investment for you of about $50,000 or $60,000.

Steve Lewit: Exactly.

Gabriel Lewit: It’s incredible. If you can think to do it, and I really push this a lot, and surprisingly few people do it for whatever reason, so I don’t know. But I’m going to continue to campaign for that.

Steve Lewit: Well, it’s the power of compound interest. I kind of think about that and sometimes I’ll poo-poo it because everyone says, “What did Einstein say? It’s the greatest invention in the world” or something like that.

Gabriel Lewit: You have an out this year, by the way.

Steve Lewit: I do?

Gabriel Lewit: Because your grandkids don’t have earned income yet at 10, nine, and five.

Steve Lewit: Oh, thank goodness. Thanks, Gabe.

Gabriel Lewit: But not for the 529. You don’t get out of the 529.

Steve Lewit: Yeah, so Einstein said, “The greatest-”

Gabriel Lewit: It’s the Eighth Wonder of the World, compound interest.

Steve Lewit: Eighth Wonder of the World.

Gabriel Lewit: Yes.

Steve Lewit: And it really is. When you put pencil to paper and write the numbers, it really does the job over time.

Gabriel Lewit: Yep. Okay. So let’s talk a little bit more here about the other options, which I’m not as big of a fan of, but just to round out the options here for you for a minute or two. You could invest also in a custodial account, called a trust account for a minor, Uniform Trust for Minors Act, UTMA.

Steve Lewit: UTMA.

Gabriel Lewit: UTMA account, okay, for short. And essentially, this is you gifting money to a child. It goes into the UTMA account. It is for their benefit only. You cannot take it back out. And then essentially they must use it for, in theory, anything they want to, as long as it’s for them, not for you. Okay, but the biggest downside about these, folks, is it’s considered the kids’ money and it will be counted at the highest levels for future college financial aid relative to other types of assets.

Steve Lewit: On the FAFSA form.

Gabriel Lewit: On the FAFSA. Yep. So keep that in mind. It’s not a bad option, but if you think this child will be going to college, putting a bunch of money in that custodial account will drastically reduce future financial aid that they might otherwise receive. Muni bonds is … People used to gift all the time, savings bonds, and I would just not recommend that. I know it seems cool, like here’s a little bond certificate.

Steve Lewit: My parents would buy me a savings bond every year.

Gabriel Lewit: Really? Yeah. Why is it? Because if 30 years goes by … I’ve had clients cashing in savings bonds that they inherited like 40 years ago, and the amount of interest that they’ve earned is really not very much.

Steve Lewit: And then they stopped earning interest.

Gabriel Lewit: Yeah. And it’s like, just chuck it in an S&P 500, please. Even in an UTMA is better.

Steve Lewit: Let it grow.

Gabriel Lewit: Yeah. Not that anyone’s going to complain about getting the muni bonds. Now, you could also just gift the … I’ve had one of my wife’s grandparents gifted some money to the kids, and he just wrote us the parents a check, which we then promptly deposited into the 529. But he didn’t have any preference what we did with it. “Save it for the kids.” So you could always just gift money, but I think if you know these concepts here, you can help empower maybe the parents of your grandkids, or your kids. Maybe they aren’t as familiar with these things as you are and you can help really guide them and navigate them through these things.

The last thing might be gold. You could just buy your kid a gold bar like they had at Costco. Just give it to the parents and put it in a safe spot or-

Steve Lewit: That’s pretty cool. I never thought of that. That would be something I would do.

Gabriel Lewit: But the problem is, the parents, they might be tempted to …

Steve Lewit: Liquidate the gold.

Gabriel Lewit: Liquidate the gold for themselves. You never know. You got to be careful there. So anyways, there you’ve got it. Silver would also apply in this kind of rare metals thing.

Steve Lewit: Well, there’s one more strategy that is out there a little bit that I’d like to bring to everybody’s attention, and it’s a strategy that I really like better than all of these.

Gabriel Lewit: Oh.

Steve Lewit: Better than all of them.

Gabriel Lewit: I know what you’re going to say.

Steve Lewit: You know where I’m headed with this.

Gabriel Lewit: Yep.

Steve Lewit: So, you’re the grandparent and you want to give your grandkids, let’s say five grand a year or 10 grand a year towards their education or towards their life. Well, what you could do, now, track me on this and let me know, Gabriel, if I go too fast, you, the grandparent, buy a life insurance policy, not on the grandchild, but on your son or daughter, their parent. You buy it, you own it. It’s on them. That policy is designed to build cash value. Let’s say a child is one. 18 years later, inside the life insurance is all this cash value, maybe $200,000, $300,000, depending on what you’ve put in there. And that money can be used for anything.

And the neat part about this is it’s all tax-free. It’s outside of the tax system. And if the grandparents somehow needs that money, let’s say they run into a financial crisis, it’s still under their name, they could actually use it. So the parent buys a life insurance policy on their son or daughter for the use of the grandchild totally out of the tax system and not on any FAFSA or anything like that.

Gabriel Lewit: Yep. That’s another option as well and doesn’t require earned income, and still creates tax-free income down the road.

Steve Lewit: Exactly.

Gabriel Lewit: Just lots of choices here, folks. And the idea is, instead of just giving the next … Which obviously kids want a present under the tree from grandma and grandpa, so you can get them the next Nintendo Switch game, obviously.

Steve Lewit: Is that what I need to get?

Gabriel Lewit: But on top of that, you could set them up for something they won’t appreciate now, but they very much will appreciate later down the road.

Steve Lewit: What’s a Nintendo Switch game, now that you’ve brought it up?

Gabriel Lewit: Do you know what the Nintendo Switch is? It’s a gaming console.

Steve Lewit: I know what a Nintendo is, yes.

Gabriel Lewit: Yes. Well, if you wanted to, you could get your grandkids the Nintendo Switch 2, which they don’t currently have yet. It’s just an idea.

Steve Lewit: Katie, could you jot that … Oh, how much is this going to cost me, Katie?

Gabriel Lewit: It’s only $499.99.

Steve Lewit: $499.

Gabriel Lewit: It’s the small gifts.

Steve Lewit: Let me check my list and budget.

Gabriel Lewit: Question is, do you love your grandchildren?

Steve Lewit: There’s no doubt I love my grandchildren.

Gabriel Lewit: Then of course you have to-

Steve Lewit: I was just on WGN the day before yesterday talking about budgeting and impulse buying and how not to overspend for Christmas or holiday, and now you want me to buy a $500 gift.

Gabriel Lewit: I’m just teasing.

Steve Lewit: Does each one get one or do they use it together?

Gabriel Lewit: Yes, color coded. Color coded. All right. Well, let’s move on to our next topic for today, which is going to be talking about year-end tax moves. By the way, if you have any questions on any of those financial gift giving options for your grandkids, please let us know. You can call us (847) 499-3330. We can also help you set up all of those accounts. I think that’s kind of the key takeaway there. Just start thinking about it and be purposeful with it. Look, if you’re going to leave this money to your kids and then your kids are going to leave this money to their grandkids, why not just short circuit that now and get this going and really create this cool legacy? My two cents.

Steve Lewit: Or you could just give them a gift of love and not spend anything.

Gabriel Lewit: But that’s actually opposite of what I’m talking about. But yes, you want to give them love, but the point is, here’s what happens, here’s what happens.

Steve Lewit: I’m teasing you.

Gabriel Lewit: No, I really do mean this. People leave money that they know they’re going to leave and they don’t want to do anything with it now. But if they did something with it now, it could be worth hundreds of thousands of dollars more after taxes down the road than if they just did nothing with it now.

Steve Lewit: Exactly.

Gabriel Lewit: It just to me makes dollars and cents.

Steve Lewit: It does.

Gabriel Lewit: Okay. Well, let’s talk taxes here. So 12 smart year-end tax planning moves. And if you’re a client of ours, probably a month or two ago, I think you got a letter talking about year-end tax planning. But with the year-end rapidly approaching here, we thought we would reiterate some of these main or most important, or most common year-end planning topics, just to make sure that you’ve had a chance to digest these things or make sure that they are working for you.

Steve Lewit: Let me set this up a little bit, Gabriel. I think everybody is very stock market-oriented and thinks, “Oh, I’ve got to make big gains or modest gains, but gains in the stock market to build my wealth.” That is the number one go-to wealth building that people think of. And yet where the real wealth is, when you reach retirement especially, is not in the stock market. That builds wealth, but the real wealth is not what you make, it’s what you keep, and that’s where tax planning becomes so important. And it’s not like a side topic, like, “Oh, I’m going to think about tax planning.” “I’m investing my money this way in the market,” tax planning is equal to that, if not more important.

Gabriel Lewit: Well, yeah. The whole goal, I think for most people if I offer them two options, “Would you like to pay more in taxes or would you like to pay less in taxes?” I’ve never got somebody yet that says they want to pay more. Have you?

Steve Lewit: No. Well, I did once. Once I had a person, well, they said, “I want to pay my fair share.”

Gabriel Lewit: I think I did get one client that said, “Well, we’ve got to do our civic duty.”

Steve Lewit: “We got to do our civic duty” person. Right.

Gabriel Lewit: Yes, of course. We can’t have roads and paramedics and firefighters and all that stuff without them, but yes, most people would rather if they could, because it is legal, these are all legal things, pay less if you can. So let’s jump into those. I agree with you, Steve, a dollar saved on taxes is a dollar earned that isn’t due to investment gain, and is still a valuable way of creating wealth in your planning, right?

Steve Lewit: Yes. Yes.

Gabriel Lewit: All right.

Steve Lewit: Well said.

Gabriel Lewit: So, let’s go through the list. Now, obviously there’s hundreds of things that you could do from a pure tax planning perspective. Many of those will be beyond the scope of a quick segment here on our show. So let’s talk about some of the most common ones here. Most commonly you’re going to have … Tax-loss harvesting is one of these year-end activities. Many of you may know what this is. Just in case you don’t, tax-loss harvesting, first and foremost requires what’s called a taxable brokerage account, meaning a trust account, individual account, a joint account, a joint trust account. But it cannot be an IRA or a Roth IRA or a 401(k) or a Roth 401(k) or a TSP or a 403(b) or anything that’s called a qualified retirement planning account, because those are all tax deferred.

Steve Lewit: Exactly. So it makes no sense to tax-loss harvest an account that has no taxes until you withdraw the money.

Gabriel Lewit: Correct. Yeah, so tax-loss harvesting, number one, has to be in a taxable account. Number two is you have to have stock positions or fund positions that are in a loss currently. So that’s sometimes more difficult when the market has been going up for a couple of years, but you may still have them. So if you have that taxable brokerage account, go ahead, go take a look at your position report, take a look at your unrealized gain/loss column. See if there’s any reds for losses there, meaning the money has gone down in value since you purchased it. And if that position no longer fits for what you’re doing in your long-term planning, you could sell it, harvest that loss to offset ordinary income on your tax return or other capital gains, and it will also carry forward indefinitely if you don’t use it on this year’s tax return.

Steve Lewit: Yeah, so this happens often folks when you’re rebalancing your portfolio. Rebalancing means, let’s say you have 10% of your portfolio in US large cap stocks, and those really explode in value and now all of a sudden you have 15% of US large cap stocks. And that’s like, “Whoa, I don’t want to have that much.” So you want to sell 5%. That’s all gains. And in your portfolio, you’re looking for losses to offset those gains so that it’s not a taxable event. That’s part of your tax-loss harvesting plan.

Gabriel Lewit: Yeah. Now again, you may not have losses. If not, that’s not a bad thing, but there are other strategies unrelated to year-ends called direct indexing and other things, where you can artificially create tax-loss harvesting opportunities while still growing your money positively in, essentially an index. That’s beyond the scope of today’s call. Okay. Now, another year-end item which is very important, would be Roth conversions. This is sort of the season for those. A Roth conversion, very briefly, taking a pre-tax IRA or 401(k), converting it to a forever tax-free Roth IRA or Roth 401(k). That must be done by year-end, just like tax-loss harvesting must be done by year-end. Now, Roth conversions, we could spend hours talking about them, but the concept here is getting money from pre-tax to tax-free, and again, doing so before the end of the year. So, we do have some time left there, but we’re getting close.

Steve Lewit: It’s-

Gabriel Lewit: Because there’s calculations to do those the right way. So let us know if that’s something that we can help you with sooner versus later, if that’s still on your radar.

Steve Lewit: Yeah, very important. Remember, what we’re trying to do all the time is move money from the taxable buckets into the tax-free bucket. Why? Because if you think about the state of the economy and the state of the national debt, we have $38 trillion in national debt, and maybe in 15 years we have $75 trillion of national debt. So the thing is, do taxes go up in the future? I think so. And a lot of people agree. And if you agree, you want to move as much as possible into that tax-free bucket, which is why Roth conversions are so important.

Gabriel Lewit: Amen.

Steve Lewit: Amen.

Gabriel Lewit: Now this one is two quick ones here. One we just talked about earlier, 529 plans. Those contributions must be done by end of calendar year. Which is different than the other thing we talked about earlier. A Roth IRA contribution, say for a kid or a grandkid, you have up until the time you file your taxes. Let’s say you file your taxes in April 2026 for the 2025 tax year, you could make your 2025 tax year Roth contribution in that April 2026 timeframe, as long as you do it before filing your tax return for 2025.

Steve Lewit: Yeah. Most people think they all can be done the following year by April, and that is not true.

Gabriel Lewit: Yeah. Some things can, some things cannot. Okay?

Steve Lewit: Yep.

Gabriel Lewit: The next thing here would be HSAs, another quick hit item. Now, HSAs you must contribute to before the end of the year. Actually, I think you might even have until the next April. That one I’d have to double check. I sometimes get that one a little fuzzy. But either way, HSAs, if you have a high-deductible healthcare plan, HSA is a health savings account. It’s a way of putting money away tax deferred, grows tax-free, and then comes out tax-free in the future when used for qualified healthcare purposes.

Steve Lewit: Yeah, these are wonderful accounts. And folks, if you qualify for an HSA account, take a serious look at building funds inside this account, because it has a wide variety of uses, it’s tax efficient, and that’s what I would be doing if I were in that situation. I would be building funds inside an HSA.

Gabriel Lewit: Yeah. Yeah, no, definitely a whole other conversation we could talk more about, but let’s continue rolling down our list here. The next thing would be essentially knowing whether or not you think you’re going to itemize next year when you do your taxes and then taking advantage of that this year before year-end. So let’s say you were going to itemize in 2025 … Which, rules have changed, by the way, due to the One Big Beautiful Bill Act, or OB3 that passed earlier this year, making itemizing a little bit more attractive for folks with some of the SALT cap limits being removed. SALT being state and local taxes. So itemizing has a handful of things.

Number one would be, what are your state taxes? If they are generally higher because you have higher wages, that’s a good thing for itemizing. You’re going to have your property taxes. If you have mortgage interest. If you have medical expenses exceeding 7.5% of your AGI on a given year. Charitable contributions. And there’s a handful, a smattering of other little things in there as well. All of those, if you have those, you could potentially itemize. Let’s say you were close to itemizing and you had a surgery. Well, it’d be kind of late to plan one before the end of the year ad hoc here, but some people try to take advantage of that and bunch or lump all their medical things into the same tax year, so they can better itemize and take advantage of getting a tax deduction for those things. Because otherwise you just use what’s called the standard deduction, and you don’t get any special tax benefits because you can get the standard deduction anytime for any reason.

Steve Lewit: Yeah, which is an argument for the other side of the coin where you say, “You know, I’m going to defer some compensate …” For example, some of our clients have deferred comp plans and the question is, do I take the deferred comp this year or defer it to next year or the year after or the year after? And that’s all based on your tax situation and where you stand in terms of where your AGI is, and if you’re over 65, where you sit on the Medicare part B and part D price scale.

Gabriel Lewit: Yeah. Yeah, managing your brackets, knowing when to realize income or defer income to future years, that’s definitely relevant here. Another big one, RMDs, required minimum distributions, don’t forget about those by year-end. If you feel like you haven’t satisfied that yet, you’re not sure if you’ve satisfied your RMD, if you’re not even sure what an RMD is or if it applies to you, you’ve got to generally be 73 or older, otherwise you don’t have to worry about it. But if you have an inherited IRA that you’ve inherited from mom, dad, somebody else, you also have RMDs on those. You have to take those by year-end. That’s a very common one for people to miss. If you have any of those, give us a call here and we can help guide you through those.

Steve Lewit: And I would add to that, yes, they are required. Because some people always ask, “Are my required distributions really required?”

Gabriel Lewit: Yes.

Steve Lewit: Yes, they are required. Yes.

Gabriel Lewit: They are, yeah.

Steve Lewit: Yes.

Gabriel Lewit: Gifting, if you wanted to count in this tax year must be done before the end of the year. You have a $19,000 per recipient limit where you don’t have to file a gift tax return or use up your lifetime gift exclusion. So essentially, you could take advantage of that, but if you miss this year, you can’t double up next year. So that’s another year-end deadline.

Steve Lewit: And that’s more of an estate tax savings rather than in the year savings.

Gabriel Lewit: Yeah. I mean, correct. There’s some science to that. If you want to get into it a little bit more, we certainly could. We talked about charitable contributions. If you want those, again, to be for this year, those have to be done by end of year. Let’s see, is there anything else? Well, there are more. I’m trying to go through my mental list here of various things, but that’s a pretty good starting point, folks. And if you happen to have other things that you’re wondering about or that you’ve heard about and you’re wondering, “Does this make sense for me?” give us a call. We’ve covered a lot of the big ones that you’re typically going to encounter in a given year, but there are always fringe little tax techniques and little things here and there that you may be wondering about or questioning about.

I had actually one last one that popped up. That’s the one I was thinking about because it just came up the other day. I had a client that happened to be in a 0% capital gains bracket, which means he could sell stocks that were up and realize 0% taxes on those gains, step up his basis, and then in theory reinvest in something similar but a little different, and be essentially in the same net position. But he used up this what’s called 0% capital gains bracket. Generally you have to have on the month-to-month basis lower income to be able to do this, but if you fall into that, that’s a great thing to take advantage of and you don’t want to miss that opportunity either.

Steve Lewit: Yeah, so there are a lot of options. There are a lot of tricks to the trade, so to speak. But it’s worth taking 15, 20 minutes going down the list and saying, “What of this list applies to me?” And if you’re not sure about what to do, that’s why we have a total tax department here to help you make those decisions that runs tax plans, sample tax plans for you, and project out the best strategy for you to use going forward.

Gabriel Lewit: Amen again.

Steve Lewit: Amen.

Gabriel Lewit: Well said, well said. Okay, so that’s our list for you. Instead of 12 Days of Christmas, we got 12 Smart Year-End Tax Moves. I didn’t actually count them. We might have skipped one or two. I think we had close to 12 in there. Anyways, if you have questions on those or anything we talked about today, please give us a call. We’re here for you. Well, we would love to talk with you about taxes or gifting or grandchildren or anything fun or finance related. You can reach us here, (847) 499-3330 or go to sglfinancial.com, click contact us, or email us info@sglfinancial.com.

Steve Lewit: Amen to that.

Gabriel Lewit: All right.

Steve Lewit: Well said.

Gabriel Lewit: Lots of amens today.

Steve Lewit: Yep.

Gabriel Lewit: Have a wonderful rest of your week and rest of your day, and we will talk to you on the next show.

Steve Lewit: All right. Stay well, everybody. Enjoy your shopping.

Gabriel Lewit: Bye-bye.

Steve Lewit: Bye.

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