DECEMBER 2025
Year-End Items to Consider
Required Minimum Distributions (RMDs)– Retirement plans, including 401 (k), 403 (b), IRA, Inherited IRAs, SEP, SIMPLE IRA, among others, are subject to RMDs. RMDs are the dollar amounts that must be distributed each year from these accounts and reported as ordinary income. The Internal Revenue Service “IRS” may impose severe penalties if RMDs are not taken.
Inherited IRAs-
If the IRA owner is deceased before 2020, and the inherited IRA is established, the beneficiary may take RMDs over their life expectancy.
If the IRA owner is deceased in 2020 or later, and the inherited IRA is established, the non-spousal beneficiary must take RMDs over 10 years and must take RMDs in each of the 10 years. The account must be fully distributed by the end of the 10 years.
Other Retirement Accounts-
RMDs for those born before 1960 commence at 73 years of age.
RMDs for those born in 1960 or after commence at 75 years of age.
Annual RMD is based on the account’s value on the last day of the previous year and the owner’s life expectancy table issued by the IRS.
Tax Loss Harvesting- A technique used to “book” unrealized losses in a non-retirement account to use these losses against gains in the current year or the future.
Sell an investment for a loss and buy a similar but not identical investment.
Example- sell Coca-Cola (KO) and buy Pepsi (PEP).
On day 31 after the KO sale, sell PEP and buy back KO.
Wash-Sale Rule- if KO is repurchased within 31 days or after the initial loss sale, the loss can be used to offset capital gains or to be used as a deduction against income ($3,000/ year limit). If, however, KO is repurchased within 30 days of the loss sale, the loss is not allowed to be utilized under the wash-sale rule.
Roth Conversion- The process of “converting” funds from an IRA to a Roth IRA, which is a tax-free account. This may be appropriate for IRA owners in a lower tax bracket than they expect to be in future years. The converted funds are reported as ordinary income. If you are receiving Medicare benefits and paying Medicare plan premiums, the additional taxable income may increase your Medicare premiums. So, this possible premium increase needs to be taken into consideration in the Roth Conversion analysis.
Rich Lawrence, CFA December 5, 2025
DISCLOSURE:
Opinions about the future are not predictions, guarantees, or forecasts. Investing in stock and bond markets has risks that could lead to investors losing money. Lawrence Wealth Management and Rich Lawrence are not tax advisors. Before making any tax-related decisions, consult a licensed tax advisor.