It feels a little hard to believe, but there are only a few months left in the year. This means your tax planning window is still open. And, with this year’s new tax law, tax planning might be even more important than usual.

One of the most overlooked tax strategies – specifically designed for lower income taxpayers – is capital gains harvesting. For some investors, realizing gains before year-end can actually be tax-free. If your taxable income happens to fall in the 12% federal tax bracket, you can sell investments that have gone up – immediately repurchase that same investment to reset your cost basis higher – and magically owe zero federal tax. Too good to be true? It’s not.

For retirees, using your IRA as your charitable donation tool is a great tax trick. After age 70½, you are allowed to donate to charity directly from your IRA and your donations won’t count as taxable income. Once you hit age 73, it gets better. Your IRA donations will even help satisfy your annual required minimum distributions, known as RMDs. This tool is a no-brainer.

Your RMDs can also help you manage your tax payments. Withholding the right amount of taxes directly from your IRA distributions can completely eliminate the hassle of having to send in quarterly estimated tax payments. If you don’t really need your RMDs to fund your life during the year, you might want to wait to take your IRA distribution until you’ve done your year-end tax projection. After you estimate your overall tax liability, you can then just withhold what’s needed in one fell swoop. Tax season really shouldn’t feel very suspenseful.

With the new tax law’s senior deduction for those over age 65, Roth conversions might look even more favorable now. As a refresher, Roth conversions are about moving some money from your traditional IRA to a Roth IRA. The idea is to voluntarily pay your taxes now rather than later on in retirement. Of course, this decision needs to be backed up by a detailed tax analysis. This requires some tax expertise, so don’t wait until the holiday week between Christmas and New Year’s to ask for professional help.

For retirees considering Roth conversions, or realizing capital gains, you do need to keep an eye on triggering the Medicare premium surcharge, also known as IRMAA. If you don’t plan well, this surcharge can sneakily add hundreds, even thousands, to your annual Medicare premiums. It’s yet another reason to do a careful analysis late in the year when most of your tax data is known.

Finally, my list wouldn’t be complete without mentioning portfolio rebalancing. The markets have been surprisingly strong this year. It’s always tempting to let tax management crowd out risk management. That would be a mistake. In other words, don’t let the tail wag the dog.

Q: We’ve been putting away a lot each month into a 529 plan for our young son, but now I’m wondering if we’re saving too much. What happens if our child decides to skip college? Are we making a mistake?

A: Depending on how much you’re adding to the 529, I think you’ll be okay if your child doesn’t end up going to college. But, it’s smart to think things through, because the rules can be confusing.

If 529 plan money is used for something other than “qualified” education expenses, the earnings portion is going to get taxed and it will be subject to a 10% penalty. Not the whole balance, just the investment growth.

There are some ways to avoid the tax and penalty. You can always change the 529 plan’s beneficiary to another family member. The list of eligible family members is quite long. Changing the beneficiary will keep the 529 balance fully available without tax or penalty implications.

Another option is relatively new. Once your 529 account has been open at least 15 years, any leftover money can be rolled over to a Roth IRA for your child. The rollover rules are a bit restrictive, though. For example, a rollover is limited to annual Roth contribution caps at that time. And, there is a $35,000 lifetime limit for these rollovers. Regardless, this feature might be a really powerful way to shift the unused 529 balance toward your child’s future retirement.

Q: We sold our house this year and we’ll have a big capital gain to report. I’m now worried this means our Medicare premiums will jump. Someone told me we could file a form with Social Security to avoid an increase. How does that actually work?

A: Yes, there is a way to do this. But, the SSA-44 form can only be used for certain allowable reasons. Examples are your retirement, a divorce, or the death of your spouse. There are officially eight approved reasons listed on the form. The basic idea is to capture events that have a longer-term effect on your finances. Selling your home at a big gain isn’t on the list. So, filing an SSA-44 in your case won’t reduce your premiums.

It’s good for you to understand the timing of all of this. Your Medicare premiums are based on your income from two years before. Your capital gain on your home will show up on your 2025 tax return, but that gain won’t impact your Medicare premiums until 2027.

To be specific, in late 2026 when Social Security prepares your benefits letter for the upcoming year, they will look back at your 2025 tax return, see that capital gain, and adjust your Medicare premiums higher for 2027. Then, since your income in 2026 will have presumably dropped back down again, your Medicare premiums should reset to the lower amount starting in 2028. In other words, it all works on a two-year lag.

Q: I work as a server and most of my income comes from tips. I’ve heard something about a new big tax deduction just for tipped workers. Could it actually lower my taxes?

A: Yes, it will definitely lower your taxes. Under the new tax law, people who traditionally receive tips can now deduct a large chunk of their tip income each year. It’ll amount to a pretty big tax cut for you.

The rules are simple. When you file your tax return next year, you’ll get to deduct up to $25,000 of your reported tip income. Oddly, married filers – even if both people earn tips – will only get to deduct up to a maximum of $25,000, not $25,000 each. It amounts to a weird marriage penalty (and likely a flaw.)

Let’s say you’re single and earn $45,000 this year with $32,000 of that coming in the form of tips. Right off the top, you’ll now get to deduct $25,000 of that tip income. Then, as usual, you’ll also get to use the standard deduction (which is now set at $15,750 for a single filer.) After these two deductions, you’ll end up paying federal tax on only about $5,000 of your total income. I estimate the new tip deduction will lower your taxes by a bit more than $2,500 in 2025. Not a small tax break.

Q: President Trump is pressuring the Federal Reserve to cut interest rates. As usual, he’s being really aggressive about it. Everything I read says it sets a bad precedent. But, does it really matter and do you think the Fed is really listening anyway?

A: I think it matters. The Fed was set up to be independent from politics. Just imagine if our politicians were in control. To win reelection, I think it’s safe to say they’d choose lower rates now even if it meant higher inflation or financial instability later.

Trump has been going after the Fed, and specifically Fed Chair, Jerome Powell, since his new term started. The pressure has been ramping up, even after the Supreme Court said he can’t just fire Powell. That is, except for “cause.”

So, now Trump is using the cost overruns on a big renovation project at the Fed as proof of Powell’s mismanagement. In addition, the Trump administration just threatened criminal charges against a Fed board member over an old mortgage application. On top of that, there was the sudden and unexplained resignation of another Fed board member earlier this summer.

But, I must say, markets haven’t reacted much to all of this. Investors must think the Fed will hold its ground. My worry is once trust in an independent Fed is damaged, it’ll be very hard to rebuild. I suppose you can add this to the list of similar worries about the slow erosion of trust in our institutions. It’s all starting to feel normal, so that might explain the market’s general calm.