The 529 Plan
Open a 529 Plan for yourself and your children now. The new rule from the
Secure Act 2.0 says after 15 years, the beneficiary can roll $35,000 out of the
529 Plan into a Roth IRA. A 529 Plan can be used for college, but you can use a
Roth for anything! Indiana and many other states have approved providers to get
state credit and deductions. Go to collegechoice.com to see if your state has an
approved provider.
Open a Roth IRA
You qualify! Even a teenager working their first job qualifies. If you can show you
have earned income, you qualify! A Roth IRA becomes tax-free after it has been
open for 5 years. Although the annual contribution limit is $7000 in 2025, you can
start a new Roth IRA with just a few hundred dollars.
Energy Efficient Windows or Furnace or A/C
Do you need solar, back-up batteries, doors, windows, furnace or A/C by the end
of the year? Based on what you spend, you can receive a tax credit up to 30%.
The credit expires on 12-31-25, so act fast!
High-Deductible? Use it now.
If you have major expenses from a large medical bill or a high-deductible health
insurance plan, think about applying those expenses to this year’s deductible. It
might be rare, but you could have enough medical expenses to deduct this year.
Consider the cost of braces, dental
Open a Health Savings Account (HSA)
You are qualified for a Health Savings Account if you have a qualified high
deductible self-employed health insurance plan. Or you could also take
advantage of your employer provided health savings account. If you do not plan
on itemizing, the H.S.A will allow you to deduct up to $4,300 in qualified medical
expenses if filing individually, and $8,550 if filing jointly.
Charitable Contributions
The new deduction floor starts on 1/1/2026. If you are able, pre-pay 2026
charitable contributions in 2025.
Delay Business Income and Pre-pay Business Expenses
Consider delaying billing until early next year if you are a freelancer or collect
income in similar ways. You could also pre-pay some expenses this year to take
advantage of the tax deductions. That way, you are able to limit your taxable
income and increase your expenses this year.
Gift Loved Ones
The 2025 Annual Gift Tax Exclusion allows an individual to gift as many people
as possible $19,000 per recipient in one year. This amount will stay the same in 2026. For example, if this individual has four children, he or she can gift each
child up to $19,000 each. As for married couples, each individual in the couple
can gift $19,000 each to all four children. While the individual or couple making
the gifts will not receive an income tax deduction, the recipients will not owe
income tax on the gifts,
Required Minimum Distributions
If you are 73.5 or older, you have until December 31 st to receive your Required
Minimum Distributions from your traditional IRAs, 401(k)s, and other retirement
accounts. This is important to remember because the longer you wait after you
turn this age, penalties can accrue. Missing this deadline can result in a 25%
penalty, but if the distribution is taken within 2 years, a 10% penalty will follow.
The first RMD payment is due April 1 st following the year you turn 73. Carefully
think about waiting until the April 1 st deadline if this is the first year, that way, you
are not taking two RMDs in one year because this can increase your taxable
income.
2026 is Coming Soon!
Not everyone’s tax situation is the same. It is important to understand your own
tax circumstances, so you know what the right decisions are.
Our Team at NSO and Company is here year around to assist you with any tax
planning needs. Please don’t hesitate to contact us at 317-588-3131.
