Tax

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2025 income taxes. 

The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies. 

Here’s the gist:

• Avoid the high taxes (up to 40.8 percent) on short-term capital gains and ordinary income.
• Lower the taxes to zero—or if you can’t do that, lower them to 23.8 percent or less by making the profits subject to long-term capital gains taxes.

Think of this: you are paying taxes at a 71.4 percent higher rate when you pay at 40.8 percent rather than the tax-favored 23.8 percent. 

To avoid higher rates, here are seven possible tax planning strategies.

Strategy 1

Examine your portfolio for stocks you want to unload, and make sales where you offset short-term gains subject to a high tax rate, such as 40.8 percent, with long-term losses (up to 23.8 percent). 

In other words, make the high taxes disappear by offsetting them with low-taxed losses, and pocket the difference.

Strategy 2

Use long-term losses to create the $3,000 deduction allowed against ordinary income. 

Again, you are trying to use the 23.8 percent loss to kill a 40.8 percent rate of tax (or a 0 percent loss to kill a 12 percent tax, if you are in an income tax bracket of 12 percent or lower).

Strategy 3

As an individual investor, avoid the wash-sale loss rule. 

Under that rule, if you sell a stock or some other security and then purchase substantially identical stock or securities within 30 days before or after the date of sale, you don’t recognize your loss on that sale. Instead, the tax code makes you add the loss amount to the basis of your new stock.

If you want to use the loss in 2025, you’ll have to sell the stock and sit on your hands for more than 30 days before repurchasing that stock.

Strategy 4

If you have lots of capital losses or capital loss carryovers and the $3,000 allowance is looking extra tiny, sell additional stocks, rental properties, and other assets to create offsetting capital gains.

If you sell stocks to purge the capital losses, you can immediately repurchase the stock after you sell it—there’s no wash-sale “gain” rule.

Strategy 5

If you give money to your parents to assist them with their retirement or living expenses, or to your children (specifically, children not subject to the kiddie tax), consider giving them appreciated stock instead.

Why? If the parents or children are in lower tax brackets than you are, you get a bigger bang for your buck by 

• gifting them stock, 
• having them sell the stock, and then
• having them pay taxes on the stock sale at their lower tax rates.

Strategy 6

If you are going to donate to a charity and you itemize your deductions, consider using appreciated stock rather than cash, because a donation of appreciated stock gives you more tax benefit.

It works like this: 

• Benefit 1. You deduct the fair market value of the stock as a charitable donation.
• Benefit 2. You don’t pay any of the taxes you would have had to pay if you sold the stock.

Example. You bought a publicly traded stock for $1,000, and it’s now worth $11,000. If you give it to a 501(c)(3) charity, the following happens:

• You get a tax deduction for $11,000. 
• You pay no taxes on the $10,000 profit.

Three rules to know:

1. You must itemize your deductions to benefit from this strategy.
2. Your deductions for donating appreciated stocks to your church and other 501(c)(3) organizations may not exceed 30 percent of your adjusted gross income.
3. If your publicly traded stock donation exceeds the 30 percent, no problem. Tax law allows you to carry forward the excess until used, for up to five years.

Strategy 7

If you could sell a publicly traded stock at a loss, do not give that loss-deduction stock to a 501(c)(3) charity.

Why? If you sell the stock, you have a tax loss that you can deduct. If you give the stock to a charity, you get no deduction for the loss—in other words, you can just kiss that tax-reducing loss goodbye.

These seven stock strategies have a long history of effectiveness in tax planning. If you need my help with any of them, please call me on my direct line at 408-778-9651  

• By Leon Clinton
• November 21, 2025

All small-business owners with one to 49 employees should have a medical plan for their business. Sure, it’s true that with 49 or fewer employees, the tax law does not require you to have a plan, but you should.

When you have 49 or fewer employees, most medical plan tax rules are straightforward.

Here are five opportunities for you to consider:

1. If you have a Section 105 plan in place and have not been reimbursing expenses monthly, do a reimbursement now to get your 2025 deductions, and then put yourself on a monthly reimbursement schedule in 2026.
2. If you want to implement a qualified small employer health reimbursement arrangement (QSEHRA), but you have not yet done so, make sure to get that done correctly now. You are late, so you could suffer that $50-per-employee penalty should your lateness be found out. 
3. But if you are thinking of the QSEHRA and want to help your employees with more money and flexibility, consider the individual coverage health reimbursement arrangement (ICHRA) instead. It’s got more advantages.
4. If you operate your business as an S corporation and want an above-the-line tax deduction for the cost of your health insurance, you need the S corporation to (a) pay for or reimburse you for the health insurance, and (b) put that insurance cost on your W-2. Make sure the reimbursement happens before December 31 and you have the reimbursement set up to show on the W-2.
5. Claim the tax credit for the group health insurance you give your employees. If you recently provided your employees with group health insurance, see whether your pay structure and number of employees put you in a position to claim a 50 percent tax credit for some or all of the monies you paid for health insurance in 2025 (and possibly in prior years).

If you need more insights into the opportunities described above, please call me on my direct line at 408-778-9651  

• By Leon Clinton
• November 18, 2025

Are you thinking of getting married or divorced? If so, consider December 31, 2025, in your tax planning. 

Here’s another planning question: Do you give money to family or friends (other than your children who are subject to the kiddie tax)? If so, you need to consider the zero-tax planning strategy. 

And now, consider your children who are under the age of 18. Have you paid them for the work they’ve done for your business? Have you paid them the right way?

Here are five strategies to consider as we come to the end of 2025.

1. Put Your Children on Your Payroll

If you have a child under the age of 18 and you operate your business as a Schedule C sole proprietorship or as a spousal partnership, you need to consider having that child on your payroll. Why? 

• First, neither you nor your child would pay payroll taxes on the child’s income. 
• Second, with a traditional IRA, the child can avoid all federal income taxes on up to $22,750 of earned income.

If you operate your business as a corporation, you can still benefit by employing the child even though both your corporation and your child suffer payroll taxes.

2. Get Divorced after December 31

The marriage rule works like this: you are considered married for the entire year if you are married on December 31.

Although lawmakers have made many changes to eliminate the differences between married and single taxpayers, the joint return will work to your advantage in most cases.

Warning on alimony! The Tax Cuts and Jobs Act changed the tax treatment of alimony payments under divorce and separate maintenance agreements executed after December 31, 2018:

• Under the old law, the payor deducts alimony payments, and the recipient includes the payments in income.
• Under the new law, which applies to all agreements executed after December 31, 2018, the payor gets no tax deduction, and the recipient does not recognize income.

3. Stay Single to Increase Mortgage Deductions

Two single people can deduct more mortgage interest than a married couple. 

If you own a home with someone other than a spouse, and if you bought it on or before December 15, 2017, you individually can deduct mortgage interest on up to $1 million of a qualifying mortgage. 

For example, if you and your unmarried partner live together and own the home together, the mortgage ceiling on deductions for the two of you is $2 million. If you get married, the ceiling drops to $1 million.

If you and your unmarried partner bought your house after December 15, 2017, the reduced $750,000 mortgage limit applies, and your combined ceiling is $1.5 million.

4. Get Married on or before December 31

Remember, if you are married on December 31, you are married for the entire year.

If you are thinking of getting married in 2025, you might want to rethink that plan for the same reasons that apply to divorce (as described above). The IRS could make considerable savings available to you for the 2025 tax year if you get married on or before December 31, 2025.

To know your tax benefits and detriments, each of you must run the numbers in your tax returns. If the numbers work out, you may want to take a quick trip to the courthouse.

5. Make Use of the 0 Percent Tax Bracket

In the old days, you used this strategy with your college student. Today, this strategy does not work with that student, because the kiddie tax now applies to students up to age 24. 

But this strategy is a good one, so ask yourself this question: Do I give money to my parents or other loved ones to make their lives more comfortable?

If the answer is yes, is your loved one in the 0 percent capital gains tax bracket? The 0 percent capital gains tax bracket applies to a single person with less than $48,350 in taxable income and to a married couple with less than $96,700 in taxable income.

If the parent or other loved one is in the 0 percent capital gains tax bracket, you can add to your bank account by giving this person appreciated stock rather than cash.

Example. You give Aunt Millie shares of stock with a fair market value of $20,000, for which you paid $2,000. Aunt Millie sells the stock and pays zero capital gains taxes. She now has $20,000 in after-tax cash, which should take care of things for a while.

Had you sold the stock, you would have paid taxes of $4,284 in your tax bracket (23.8 percent x $18,000 gain).

Of course, $1,000 of the $20,000 you gifted (the amount over the $19,000 gift-tax exclusion) goes against your $13.99 million estate tax exemption if you are single. 

If you’re married and you make the gift together, you each have a $19,000 gift-tax exclusion, for a total of $38,000, and that eliminates the gift tax. But if you don’t live in a community property state, you must file a gift-tax return that shows the government you split the gift.

I know that taxes can cause confusion. Remember, that’s why you have me! I’m always here to be of service. If you want to discuss any of the strategies described above, please call me on my direct line at 408-778-9651  

• By Leon Clinton
• November 14, 2025