Watching my kids trick-or-treat on William Street this past weekend brought back memories of doing the same thing in Vineyard Haven when I was growing up. Now my office is just around the corner, and I’m involved with the Vineyard Haven Business Association. Being there as a parent and a local business owner feels a little surreal. It’s one of the things I appreciate most about being back home.
By November, the Island has a different rhythm. For many of us, there’s finally a little room to catch our breath after a busy season. It’s also a good opportunity to look at where the year is headed financially, while there’s still time to make adjustments. Taxes may not be the first thing anyone wants to think about after Halloween, but a conversation now can be more useful than a surprise in April.
I’ve spent close to 20 years in the investment industry, and one thing I’ve seen repeatedly is how much it matters to coordinate investment decisions with tax planning. Many people have someone preparing their return each spring. But unless there’s also a planning conversation during the year, that person is largely reporting what has already happened. Preparing an accurate return is important, but by March or April, the cake is mostly baked, with a few exceptions. Right now, we still have time to adjust the recipe.
That’s why a lot of my time this part of the year goes toward looking ahead. Should we increase retirement contributions, sell an investment, or consider a Roth conversion? Would a charitable gift be more effective coming from an IRA? Could one of those decisions affect a deduction somewhere else? Each choice can make sense on its own, but the best answer usually comes from looking at them together.
The starting point is a reasonable estimate of this year’s income. Gather your latest pay stub, expected business income, retirement withdrawals, and any investment gains you’ve already realized. The estimate doesn’t need to be perfect. It just needs to give you a useful picture of where you stand. If you’d like help getting started, there’s a tax calculator on our website at vineyardwealthgroup.com. For seasonal business owners, this is also a good time to check estimated tax payments. A strong summer can leave you with a bigger bill than expected.
Several recent tax changes make that review especially worthwhile. People age 65 and older may qualify for an additional federal deduction of up to $6,000 each, or $12,000 for a married couple filing jointly if both qualify. It’s available whether you itemize or take the standard deduction, and it’s currently in place through 2028. The deduction gets smaller as income rises above $75,000 for individual filers or $150,000 for joint filers.
That income limit matters when deciding how much to withdraw from retirement accounts or whether to complete a Roth conversion. A conversion generally means paying tax now to move retirement money into a Roth account, where future qualified withdrawals are tax-free. It may be a good long-term decision, but the added income can also reduce the senior deduction. That doesn’t automatically make the conversion a bad idea. It means the full cost deserves a look before you act.
For the Vineyard’s many servers, bartenders, and other tipped workers, the new federal deduction for tips deserves attention, too. Eligible workers may deduct up to $25,000 of qualified tips each year through 2028, subject to income limits and other requirements. Married taxpayers must file jointly to claim it. But “no tax on tips” doesn’t mean every tax disappears. Social Security and Medicare taxes still apply, and Massachusetts hasn’t adopted the federal deduction.
The distinction between a tip and a service charge matters as well. A voluntary amount left by a customer may qualify, while an automatic charge added to the bill generally doesn’t. Before year-end, check that your tips are being reported correctly and that your records are organized. There are also new federal deductions for certain overtime pay and interest on qualifying loans for new vehicles assembled in the United States. Both come with restrictions. The overtime deduction, for example, generally covers the extra “half” of federally required time-and-a-half pay, rather than the whole overtime check. Massachusetts hasn’t adopted either deduction or the new senior deduction.
Retirement contributions remain another practical place to look. Increasing contributions to a traditional 401(k), 403(b), or similar workplace plan can reduce current taxable income while adding to retirement savings. If you want to make a change, check with your employer soon, since employee contributions generally need to come through payroll before year-end. Roth contributions don’t reduce current taxable income, and starting in 2026, certain higher-paid employees must make their age-based catch-up contributions as Roth contributions.
IRA contributions generally allow more time, usually until the tax filing deadline the following April. Whether a traditional IRA contribution is deductible depends on your income and workplace retirement coverage. The question is which type of contribution makes sense given your taxes today and what you expect in retirement. A deduction now can be valuable, but it shouldn’t be the only reason for choosing an account.
Charitable giving is another area where a little planning can help. Starting in 2026, eligible taxpayers who don’t itemize can deduct up to $1,000 in qualifying cash donations, or $2,000 for married couples filing jointly. Gifts to donor-advised funds don’t qualify for this particular deduction. With so many Island organizations doing important work, it’s worth keeping records of your gifts rather than assuming they won’t affect your return.
For people age 70½ and older, giving directly from an IRA may be worth considering. This is called a qualified charitable distribution. When handled correctly, the money stays out of federal taxable income and can count toward a required minimum distribution. The transfer needs to go directly from the IRA to an eligible charity. Taking the withdrawal yourself and then writing a personal check generally doesn’t produce the same result, so it helps to arrange the gift before moving the money.
If you have investments outside retirement accounts, review any gains and losses before year-end. Selling an investment at a loss may help offset taxable gains. However, buying the same or a substantially identical investment within 30 days before or after the sale can prevent you from deducting the loss under the wash-sale rules. In a lower-income year, the opportunity may go in the other direction: realizing some gains at a lower federal tax rate or converting part of a traditional IRA to a Roth.
These decisions belong in the same conversation, especially when looking beyond this year’s return. Traditional IRAs and most workplace retirement accounts eventually require you to take money out each year, even if you don’t need it for spending. Those required minimum distributions generally add to your taxable income. Combined with Social Security, pensions, and other income, they can push some of your income into a higher tax bracket later in retirement.
That’s one reason a lower-income year can be an opportunity. Taking a planned withdrawal or converting part of a traditional IRA to a Roth may mean paying more tax today, but it can also reduce future required withdrawals. Whether that trade makes sense depends on your circumstances. The goal is to manage taxes over your lifetime, rather than simply produce the smallest possible bill this April.
That longer view should also include what happens when assets pass to your family. Massachusetts has a $2 million estate tax threshold, and with Vineyard property values, a home combined with retirement savings and other assets can put a household within reach of it. Crossing that threshold doesn’t automatically mean tax is owed, but it does make planning worth a closer look. Coordinating investment decisions, retirement withdrawals, charitable giving, and your estate plan can help you consider both the taxes you may pay during your life and those your estate or family may face afterward.
Some planning opportunities remain after Dec. 31, but many others, including Roth conversions, investment sales, and most charitable gifts for the year, generally need to happen before then. You don’t need to become a tax expert to take advantage of that time. You need a reasonable picture of your finances and a conversation about what, if anything, should happen before the calendar turns.
At Vineyard Wealth Group, tax planning is built into our work with full-service financial planning clients. If you’d like to explore whether that approach is a fit, you can schedule a complimentary consultation at vineyardwealthgroup.com or call (508) 696-2000.
Grant Joiner, CFP®, EA, is the founder of Vineyard Wealth Group. He grew up on Martha’s Vineyard, graduated from MVRHS in 2003, and lives in West Tisbury.
This article is for educational purposes only and is not individualized tax, investment, or legal advice. Tax laws and eligibility requirements vary by circumstance and are subject to change. See vineyardwealthgroup.com/disclosures for important disclosures.
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