In this episode of the Resilient Investors Podcast, Victor and Kim Gaxiola discuss essential financial strategies to consider before the end of the year and how to prepare for 2026. They cover topics such as tax law changes, ROTH conversions, required minimum distributions, tax loss harvesting, and employee retirement contributions. The episode emphasizes the importance of proactive tax planning and working with financial professionals to navigate upcoming legislative changes.
Here is the full transcript of the podcast
Victor Gaxiola:
Well, thanks again to Matthew for that sweet introduction. We're happy to be back on the Resilient Investors Podcast. And today, Kim is joining me to talk about some of the things that you may want to consider doing before the end of the year and how to kick off 2026 in the right way. So Kim, welcome.
Kim Gaxiola:
Yes, and sadly, Carolyn is not joining us today and we will definitely miss her today because she is our resident tax professional.
Kim Gaxiola:
And a lot of what we have to talk about is changes and uncertainty in tax laws that are coming with the end of the year. And so we still felt like it was really important for us to get this message out to you to give you the most amount of time to think about this prior to year end. So listen up. I think the moral of this story is there's a lot to think about and a lot to be exploring.
Victor Gaxiola:
Yeah.
Kim Gaxiola:
And so working with a tax professional along with your wealth manager is always recommended to put the best foot forward for year end.
Victor Gaxiola:
Yeah, so although we'll miss Carolyn, I mean, we do have the information and Kim, you as a CFP, you certainly know your share of taxes and you work with clients all the time on this. But the reason why we wanted to record this is just because we're standing at a real pivotal moment right now because not only are we closing out the year, but we're facing the potential sunset of the tax cuts and jobs acts starting on January 1st of 2026. Now there's some legislative changes that still need to take place and we need a little bit more definition.
Victor Gaxiola:
But what you do in the next couple of days or weeks leading up to the end of the year could impact your tax bill for years to come. So that's really why we wanted to get this together. And so we want you to think of two deadlines. So the first deadline is what you may want to do before the end of this year, before the end of 2025. And then the next segment, we'll focus a little bit on some of the strategies and things that you might want to be starting to think about for 2026 that might help you with your tax bill.
Kim Gaxiola:
Mm-hmm.
Kim Gaxiola:
So if we would start out, I'd like to just kind of talk a little bit about the Tax Cut and Jobs Act and refresh your memory back when they created this a few years ago. They had reduced a lot of taxes. So the top bracket went from 39 and a half to 37, which doesn't seem like a lot, but it did help people that are in those higher tax brackets. And so that is being sunsetted.
Victor Gaxiola:
So.
Kim Gaxiola:
which means like next year, you know if you're in that highest tax bracket and others as well, that there is certainty that your taxes may go up. And so.
Victor Gaxiola:
And with that, know, recognizing that your taxes could go up, let's talk about some of the things that people can do then before the end of the year that'll help them.
Kim Gaxiola:
So one thing we love to explore are Roth conversions and whether or not that's a good opportunity for you this year to lock in today's tax rates, especially if you think you're in a lower tax bracket this year than you are next year. One other thing I'd like to note is for any of you who may have been laid off from a job this year and are not currently employed, you're
Kim Gaxiola:
income might be a lot lower. So this is something that would be a consideration if you have the means to do it is to consider while your income is lower. Think about those Roth conversions.
Victor Gaxiola:
That's top, and that's number one. Number two that I'll focus on is your required minimum distributions. Now this doesn't obviously apply to everybody, but if you are 73 plus, you must take it out before the end of the year or December 31st to avoid penalties. And it's not a small penalty, it's a 25% penalty. So it's important that you take that required minimum distribution out of your qualified money. For most people, it's out of their IRAs.
Victor Gaxiola:
just to meet that obligation. The good news is there's a pro tip. If you don't need that money, in other words, you don't need it for your own income, you can actually take the required minimum distribution and provide a qualified charitable distribution. So you actually can support some of the charities that you are looking and you align yourself with, and you actually pass on that required minimum distribution over to the charitable organization. And in doing that, you can really help.
Victor Gaxiola:
a great organization and meet your RMD obligation. Now you can send up to $105,000. Now that's the limit for 2025, but I think it's a nice way to contribute to the things that are close to your heart.
Kim Gaxiola:
And the key thing to remember when you're doing this is the money cannot go from your IRA or 401k to your hands and then...
Victor Gaxiola:
someone has a call. We have a caller on line one. Sorry about that. I guess we could have put it. should have put our phones on mute.
Kim Gaxiola:
Hahaha
Kim Gaxiola:
I know and typically my phone is on mute but I was expecting a call this morning and wanted to make sure that I did receive it. So let me make sure that this phone is back on mute.
Victor Gaxiola:
Well, while Kim is doing that, so we said when you look at the Satisfying That RMD, one of the important things is, as Kim I think was pointing out, is that you don't actually take possession of the funds yourself and then give it to the charity. It's important that it goes directly to the charity. And so there's ways that we can definitely do that by either cutting a check, I think that's probably the easiest thing to do, and sending it out to the charity. The important thing is that this wouldn't add to your taxable income. And that's one of the benefits, is you satisfy the required minimum distribution without increasing your income.
Victor Gaxiola:
because you are directly rolling it over to a charitable organization.
Kim Gaxiola:
Yes. Yes. And so one of the nice things we do when we were working with clients is our accounts, our IRA accounts can have check writing capabilities. So clients can write directly on a check to their charities, which makes it easier for them to designate how much and make it sure it's direct to that.
Kim Gaxiola:
charitable organization. And clients at that age, 73 plus, still love check writing. And so that's a helpful thing to do. Something else to think about there, I just want to add for those of you that are listening who may have parents that are 73 plus, it's really important to probably just ask them, make sure that they've done their required minimum distribution for the year as the
Victor Gaxiola:
You
Kim Gaxiola:
older generation gets into their 80s and later 80s, this is something that can cause someone to forget. And as we see clients go through cognition decline, it's very easy to overlook this, especially if they have multiple IRAs out there. And so do your parents a favor and just ask them to make sure that they have done the required minimum distributions on all their accounts if they're reaching those.
Kim Gaxiola:
upper ages.
Victor Gaxiola:
Yeah, so pro tip for those clients that we work with that do have required minimum distributions, we do have kind of a reminder system that we have built in to ensure that this is being done so we can check that box and no one faces a penalty because we are taking on the responsibility of really helping our clients that have RMDs make sure they meet that obligation.
Kim Gaxiola:
And if by chance you have come under a situation where you have noticed a parent that missed it, work with your tax professional. This is one of the reasons why it's so great to have a tax professional is I have seen a little bit more leniency with the IRS if it's recognized and corrected in a very reasonable time. I have seen a lot of CPAs work with the IRS and get that taken care of.
Kim Gaxiola:
So just make sure you're cognizant of it. Don't want that 25 % penalty. But work with professionals and they sometimes have a way of getting around that.
Victor Gaxiola:
That's right. So the third strategy is tax loss harvesting or a portfolio cleanup. This is something I've actually been working on with a number of our clients, especially in their, obviously in their taxable accounts and scanning those taxable accounts and looking for, well, not too many, but losers, ones that didn't earn and they're actually trading in such a way that if we were to sell, they'd realize a capital loss or a capital gains loss.
Victor Gaxiola:
And so what we're really doing is looking to sell those and offset them with winners so that you try to neutralize the overall capital gains that they may realize at the end of the year. So when they're filing their taxes next year in 2025. And so one of the important things there is you might be familiar with the term called the wash sale. So if you do sell a stock at a loss, you want to be very careful not to rebuy it within 30 days because you want to be able to capture and retain that loss.
Victor Gaxiola:
And if you rebuy that stock within 30 days, you won't have that treatment. So it's really important that we're very mindful of looking at it, making sure we're documenting what we're selling at what. And if we do look to wanting to rebuy it, that we don't rebuy it within those 30 days. So the primary benefit here is that you can basically get up to 3,000 in excess losses to offset ordinary income or wages and interest. And then just...
Victor Gaxiola:
pretty much manage that over year over year just so that they carry over. So it's really just kind of keeping a separate ledger on the buys and sells that are taking place in your taxable accounts.
Kim Gaxiola:
is that.
Kim Gaxiola:
Yeah, it's really important that if you have a large loss, even though you can only take the $3,000 this year, that that stays with you in your tax returns. So I notice sometimes if you change tax professionals, you want to make sure that you're bringing with them those losses so that it can help you offset gains in future years. Also something to think about is this is where, you know, the way we manage money, I really love
Kim Gaxiola:
is that we are using more stocks, individual stocks, instead of mutual funds. Part of the reason why is because when you're adding up all of your capital gains for the year, don't forget to look at your mutual funds to see what capital gains distributions are coming out of those funds. In volatile years, it seems to be there's always more capital gains than other years. And if you are looking at those capital gain distributions,
Kim Gaxiola:
and you see it is quite a bit and you are unhappy, there are better ways to manage your money. And that is where we come along and help people. So that is something that we also are looking at for our clients is not just the realized gains, but also the mutual fund holdings that could pass on large capital gains distributions as well.
Victor Gaxiola:
All right, awesome. And then I think the final one that we have to mention today is employee contributions. And so unlike your IRAs, where you have actually up until April of 2026 to make those contributions, when it comes to 401ks, the contributions normally need to be done through payroll by December 31st. So I mean, we're cutting it really close here, but the goal is really if you can to maximize that contribution.
Kim Gaxiola:
you
Kim Gaxiola:
Yes, if you have any bonuses that are going to be paid out by year end as well, think about maxing out your contribution there if you have not already. It's a good time to do that.
Victor Gaxiola:
Yeah. So those are some of the hard deadlines that before the end of the year and now what we'd like to do is do a look ahead towards 2026. And as I mentioned before, there are a series of legislative changes that are going to take place. And so the focus here is that these things could change. I so we're recording this in early December. By the time it goes out, it's probably mid December. Things can change, obviously, if you're listening to this at the beginning of 2026. So the important thing, going back to the disclaimer, is check with your tax professional, work with your tax planners.
Victor Gaxiola:
because these laws do change and it's something that we obviously are keeping abreast of as these changes are taking place and then recognizing the impact that it's making on portfolios. So there's three strategies here to take a look at. So Kim, do you want to kick off the first one with the Roth catch up?
Kim Gaxiola:
Yes, it sounds like the government really likes the Roth bucket nowadays. It's a win-win for everybody. Our clients love Roths because again, just to refresh your memory of what a Roth is, it means the money is going in after tax. And when you pull it out in retirement, it's all tax free, the earnings and the original contributions. And so what a great thing to be able to use that money in retirement.
Victor Gaxiola:
Yeah.
Kim Gaxiola:
make your Roth IRA accounts as big as possible. That's the greatest thing to do because you will pay a lot less in taxes when you retire. Now...
Kim Gaxiola:
the government likes it because they get your money, your taxes up front. it would be hard not to notice that the government needs a lot of money right now because they sure are spending too much. And so one of the ways that they're gonna start taking more money from taxpayers now is to look at those that are making over $145,000 and force the catch-up contribution, which is an additional about
Victor Gaxiola:
You
Kim Gaxiola:
Thank
Kim Gaxiola:
10,000 or roughly, I'm just going to say, of that catch-up contribution if you're 50 and older. In your 401k, must go in the Roth bucket instead of the pre-tax bucket. So this is going to change to after-tax money, which means your taxable income will be greater next year if you're contributing the max with that catch-up contribution. So if that's
Kim Gaxiola:
case and you hate paying more taxes in April and being surprised by that, you can work with your, you know, tax professional and see what would be appropriate in terms of adding more deductions from your paychecks so that you don't come up with that bigger bill at of the year.
Victor Gaxiola:
Good, I mean it's a lot, know, so it's part of working with the tax professional to take a look at that. So on the side of the pain, the pain point in all this is that you lose the tax deduction on those catch-up dollars, but so the action again is wanting to review those withholdings that you have at the beginning of the year to ensure that you are under withholding taxes due to this change and end up surprised with a larger tax bill.
Kim Gaxiola:
Yeah.
Kim Gaxiola:
it could make you end up in a higher tax bracket. You need to look at your marginal tax rates and see how that complicates things because then the highest tax bracket is going up, but also what does that mean to your capital gains and stuff like that. So there's a lot to think about and a lot to consider with these changes.
Victor Gaxiola:
Mm-hmm.
Victor Gaxiola:
Yeah. So the second potential change, I say potential again because it's due to legislation, is the TCJA sunset or the tax bracket shift. So Kim, what does that mean?
Kim Gaxiola:
Yes, so I have said that now two times. The top rate is rising, unfortunately, from 37 % to 39.6%. Ouch. That is going back up. And not only is that going back up, but the standard deductions are going to be about half of what they were. They go back to what they were prior to the Tax Cut and Jobs Act. And so this means
Kim Gaxiola:
there are a lot of people that have an easy tax return because there, especially if you're retired, your standard deduction is very large and so most retired people fall within that standard deduction without having to itemize a bunch of things to deduct for your taxes. That's being cut in half and so you may find yourself in a situation that you need to itemize.
Kim Gaxiola:
So keep all your records. Everything that can be deducted you'll want to track so that you can get some deductions from your taxes next year.
Kim Gaxiola:
Also, the SALT cap, SALT stands for State and Local Taxes. This is the one that most of us on the coast really don't like. I think I call it the making, I don't know, making taxes more equitable across all 50 states, which is to say that
Kim Gaxiola:
prior to the Tax Cut and Jobs Act, you were able to deduct all of your state income taxes and your local property taxes. All of that could be deducted from your federal tax return.
Kim Gaxiola:
no matter how much what that was. And here in California, know, easily you could be paying in the highest tax bracket $50,000 or more in taxes. All that would be deducted from your federal taxes. However, once that TCJA Act was put in place, you could only max out on $10,000 in income deductions. And so that's going away.
Kim Gaxiola:
We're not sure what it is yet. I've heard they were gonna make it go from 10,000 to 40,000. I don't know if that's still in there. There's a lot of disagreement and dysfunction in the legislative branch. And so we're a little uncertain where that's going, what that will be, if there'll be a max or what. But just know that it's gonna take a lot more tax planning next year.
Victor Gaxiola:
Okay, and then the final thing to keep in mind as far as 2026 goes is the expectation of an estate tax exemption cut. So currently the lifetime exemption currently is 13.6 million per person or know 20 or double that number for a married couple, but it's to be cut in half in 2026. So those families that are high net worth, it's really important that you have a conversation with your estate planning attorney.
Victor Gaxiola:
or you take a look at your trust, or look at gifting assets in 2025 that will be able to use that high exemption before this potentially vanishes next year.
Kim Gaxiola:
Yeah, and again, keep your eyes posted on this. This is not certain yet. It is just amongst things being talked about and we do not have the final guidelines for next year. I was actually just speaking to an estate planning attorney who thought that we were going to...
Victor Gaxiola:
Mm-hmm.
Kim Gaxiola:
keep it at the current level. It's probably not worth enough votes for them to make a lot of changes on. you know, everything in Washington has to do with votes, votes counted. And so just know that these are things that you should be, you know, even when you put your estate plan together, it's not a set it and forget it. It's a keep it up every few years and make sure it's still current with.
Victor Gaxiola:
Yeah.
Kim Gaxiola:
the current tax laws in place.
Victor Gaxiola:
Right, right. And the thing here that's important is, you know, we're a resource for a lot of our clients when it comes to all things taxes, estate planning, just from the standpoint of being able to provide that guidance just because day in, day out, we're keeping abreast of these changes that are taking place, either legislative changes or tax law changes or, you know, contribution limits. Like all these things are changing every year. you know, I'd say maybe not every year, but they change often enough to...
Victor Gaxiola:
want to work with someone that's actually keeping an eye on it.
Kim Gaxiola:
Yeah, we were laughing about the word permanent when the IRS says this is a permanent rule. No, it's not. It's just permanent till the next change.
Victor Gaxiola:
Until the next administration or...
Kim Gaxiola:
Yeah, so one of the exercises we do when we're in our planning meetings, because we like to have a lot of times with our clients, we like to designate two meetings during the year. One is more focused on investments and another one that's more focused on planning topics. And so these are the things as we come up with a new year and a new set of rules from legislation, you know, we bring up these topics and that's the value of working with us is being
Kim Gaxiola:
able to keep current on these topics and see what are the right moves for you based on the changes in legislation and tax laws.
Victor Gaxiola:
So, Kim, as we round up, let's talk about a couple I'd say, well, we listed here as hidden gems and potential housekeeping. What are some additional things that people may consider doing before the end of the year or looking into 2026?
Kim Gaxiola:
Yes, so 529 plans, some states give an extra deduction for those plans. So if you are planning on giving additional money, putting additional money away in your 529 plans, those need to be in by December 30th first. so make sure you're not doing it December 30th. It sometimes doesn't get done on time. What if you have a snowstorm or what have you? Do it now.
Kim Gaxiola:
now.
Kim Gaxiola:
And so that's really important. FSA funds. It's not my favorite account. It's the, can I say it? Flexible spending account. This is a use it or lose it account. That's why it's not my favorite account. So any money you have saved on a tax deferred basis for healthcare or, you know, it needs to be spent by the end of the year or you're going to lose it.
Victor Gaxiola:
All
Kim Gaxiola:
So, whatever the amount is, you you can spend that on eyeglasses, you could spend it on first aid kits, you could spend it on, you know, a lot of things as long as it's considered healthcare related. Make sure you spend that by year end or you will lose it. So, that's something to think about. This is different than the HSA, which is the Health Savings Account. I do not know why they have two different similar accounts.
Kim Gaxiola:
savings account is my favorite one because this is money that you get to keep forever. So there is no use it or lose it on this one. You save it, whatever you didn't use can be invested and grown over time to use for a later date. So just so you know the differences between those. Also the gifting limits, you can give 19,000 per person per spouse. So
Kim Gaxiola:
That means if you are trying to gift some of your assets to get it out of your estate, you have a lot of leeway on that. If you are a married couple and you want to give away the maximum, I could give 19,000, Victor could give 19,000 all to one child. We could give it to our grandchildren, the same amount, so 38,000 to each grandchild if we had them. We could give it to a spouse of a child.
Kim Gaxiola:
wanted to. So there are a lot of ways to gift money out of your estate and stay within those limits. Make sure you do that by December 31st as well. If you don't use it, it's gone.
Victor Gaxiola:
Yeah.
Victor Gaxiola:
You don't like that. So as you can tell, mean, 2025 is the last year of current certainty as we're approaching the end of the year. And there are these potential, also it's that asterisk of tax law changes that could take place in 2026, which impact some of the things that we were talking about today. But we don't want you to end the year not without doing kind of a review. Many people have already done this well in advance, so congratulations. But there's always the procrastinators.
Kim Gaxiola:
And now...
Victor Gaxiola:
you know, that kind of hold back and they don't really get to it until right before the end of the year. So it's important that if you don't already have, you know, a relationship with a tax planner or an enrolled agent or a CPA or someone, and you do feel that you need that help, we're a great first point of contact in that, especially for the people that we're working with, whether you are a resilient wealth planning client or a former WeRise client, you know, these are some of the additional services that we offer as part of our practice.
Victor Gaxiola:
So just feel free to reach out to us and you know where you can find us.
Kim Gaxiola:
Yes, and while our-
Kim Gaxiola:
I would say as our We are on limited time as we go to this last two weeks of the year when it comes to Christmas prep and New Year's we are always looking at our email and and voicemails So if this is urgent and something you really need to talk through someone on our team should be available to speak to you We will be there throughout the holidays and as a matter of fact, we're reserving our schedules so that we can take care of some of these last
Kim Gaxiola:
minute situations. And so we are happy to hear from you all. And bottom line is it's so funny, know, Victor, it's so many people when they talk to us, you know, they want to talk about all things market related, right? What is the stock market going to do at year end? What is it going to do next year? And while I love to talk about that, and I know you do too, that is not really in our control.
Victor Gaxiola:
Mm-hmm.
Victor Gaxiola:
Mm-hmm.
Kim Gaxiola:
Right? Nope. And so if we
Victor Gaxiola:
It is not. It'd be so much easier if it was.
Kim Gaxiola:
focus on the things we can control to a certain degree, which means get to work on the tax planning. You can't control the rates, but you can control some things to help you with planning. you you can, if you do it correctly, save some money there that will help out in the long run, maximize your, your, your money. Everybody thinks it's fun to talk about investments and earnings and
Kim Gaxiola:
how your accounts are going to go up, but don't forget to focus on those things that you can control. Like how much you save.
Victor Gaxiola:
Yeah, so true. Yeah. So let me summarize real quick, just some of the key dates that we mentioned. So in summary, with the deadline of December 31st of 2025, so at the very end of the year, some of the things that action items that you can take is number one, complete any sort of tax loss harvesting if you are in your taxable accounts. Number two, complete any Roth conversions for the 2025 tax year. And then the last one is that if you still can,
Victor Gaxiola:
The contributions in your employee 401k are due if you have an opportunity or wiggle room to increase that as Kim said with bonuses and get to the max you have until the end of the year to do that. Starting January 1st of 2026 the new Roth catch-up rules will take into effect and then the next deadline after that is April 15th of 2026 which is the tax year or the tax deadline.
Victor Gaxiola:
for 2025 IRA Roth IRA contribution. So you have until tax day to make those contributions. But remember, the 401k has to happen before the end of the year. So just thought we'd share some tips and strategies and things that you can do to really maximize your possibilities or minimize your tax bill.
Kim Gaxiola:
Yeah, and stay tuned because I'm sure there will be more details to follow before tax day, which is the first quarter of 2026.
Victor Gaxiola:
Yeah, and also stay tuned just because as we start approaching the beginning of the year or during the beginning of the year, just be on the lookout. We do plan on doing a state of the markets as we've done every year and every half year for the last, I think the last year or so. And so be on the lookout for that. We'll be sure to promote that as we get a little bit closer. And you can always find out what we're up to by visiting our website at resilientplanning.com. Check out the blog where we're adding new content.
Victor Gaxiola:
on a semi-regular basis. And we will also have an events page. So one of the exciting things that we're looking to implement in 2026 is being able to offer more financial education in 2026. This would just be very basic kind of concepts and things and exploring different areas. We know that there's an appetite for that, whether it's for existing clients or the children or kids of clients that are looking for more information.
Victor Gaxiola:
We know that there's a lot of interest in wanting to know more about it and we are more than happy to share that. So just be on the lookout for that. We hope to be able to announce early in the year a full calendar of events, at least for the next six months, possibly the full year. And so you can register and play a part in participating in these upcoming educational events.
Kim Gaxiola:
Yes, so we look forward to continuing to guide you in your financial and life journey. And we hope that we appreciate all of you clients that listen in on our podcast and we hope to hear from some of you that are listening in and just seeing what resilient wealth planning is all about.
Victor Gaxiola:
Yeah, so to that end, you know, this isn't our first foray in doing a podcast. We used to do the TechGirl financial podcast as well. But now that we've got a few episodes in for the Resilient Investors podcast, we really do appreciate any reviews, any feedback, any comments. Let us know if there's a specific area that you'd like us to talk about or perhaps explore. We'd happy to do that deeper dive and provide so much more guidance. I mean, this really is more educational.
Victor Gaxiola:
as well as it is, you know, prescriptive whenever possible. mean, obviously we, we, we, we have to have the, you know, that interpersonal relationship to really provide more customized type of advice. So we have to be fairly generic when it comes to these kinds of podcasts. But the important thing is that it's a resource to increase your knowledge and that's what we're hoping you're getting out of it. So if you like what you're hearing, if you would like to hear more, us know. this, I I'd like to think of this as a, as a dialogue. Obviously we can't hear from you.
Victor Gaxiola:
unless you write to us or send us an email. But we do look forward to hearing from you soon.
Kim Gaxiola:
We do. Thank you for listening and happy holidays.
Victor Gaxiola:
Yeah. Yeah. Happy holidays, everyone. Take care.
Kim Gaxiola:
Bye.
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