InvestED | Top 7 Year-End Tax Planning Ideas: Maximize Your Savings, Deductions, and Opportunities
As 2025 comes to a close, taking a few strategic steps now can help reduce your tax liability and position you for a stronger financial year ahead. Beyond just contributions and deductions, savvy planning can include gifts, income timing, and leveraging credits. Here’s the top 7 ideas for the 2025 year-end.
1. Maximize Retirment Contributions
Contribute to retirement accounts like 401(k)s, IRAs, and HSAs to lower taxable income:
– 401(k): Up to $30,500 (including catch-up contributions for those 50+)
– IRA: Up to $7,000 ($7,500 if 50+)
– HSA: $4,300 for individuals, $8,550 for families
These contributions not only reduce taxes today but also grow tax-deferred (or tax-free for Roth accounts).
2. Utilize Tax-Loss Harvesting
Selling investments that have declined in value can offset capital gains from other investments. This strategy, known as tax-loss harvesting, allows you to reduce taxable income by up to $3,000 in excess losses.
Carryover of Losses:
If your total net capital loss exceeds $3,000 ($1,500 if married filing separately), the remaining loss can be carried over to future tax years. You can apply it against future capital gains, and if any amount remains, up to $3,000 per year can continue to offset ordinary income until the loss is fully used. This allows investors to gradually use larger losses without losing the tax benefit.
3. Accelerate Deductions & Defer Income
– Accelerate Deductions: Prepay medical expenses, property taxes, or charitable contributions this year to reduce taxable income (if you are itemizing on your taxes).
– Defer Income: Delay bonuses, consulting income, or other earnings to next year if you expect a lower tax bracket.
4. Review Tax Withholding
Check your paycheck or estimated tax payments to ensure you’re not overpaying or underpaying. Adjusting whitholding before year-end can prevent surprises come April.
5. Take Advantage of Tax Credits
Maximize credits like the Child Tax Credit, Earned Income Tax Credit, or education-related credits. These directly reduce your tax bill rather than just your taxable income.
6. Leverage the Gift Tax Exclusion
Consider using the annual gift tax exclusion ($18,000 per recipient in 2025) to shift wealth to family members without incurring gift taxes. Gifts can reduce the size of your taxable estate while helping loved ones financially.
Example: Did you know that a married couple can give a married child and their spouse $72,000 in total?
- Mom gives daughter $18,000
- Dad gives daughter $18,000
- Mom gives son-in-law $18,000
- Dad gives son-in-law $18,000
By splitting gifts this way, the couple fully uses the annual exclusion for each recipient without triggering gift taxes.
7. Make Qualified Charitable Distributions (QCDs)
If you are 70½ or older, consider using a Qualified Charitable Distribution from your IRA. QCDs allow you to donate up to $108,000 directly to a qualified charity in 2025, counting toward your required minimum distribution (RMD) while excluding the donation from taxable income. This strategy can lower your adjusted gross income and potentially reduce Medicare premiums or tax on Social Security benefits
Year-end tax planning is about more than just checking boxes—it’s an opportunity to optimize savings, leverage credits, and strategically position your finances for the coming year. A review with a tax professional can ensure these strategies fit your situation and maximize your benefits. taxable income. This strategy can lower your adjusted gross income and potentially reduce Medicare premiums or tax on Social Security benefits.
This material and the opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. To determine what is appropriate for you, please contact your Rose Street Financial Professional. Information obtained from third-party sources are believed to be reliable but not guaranteed. The tax and legal references attached herein are provided with the understanding that neither M Financial Group, nor its Member Firms are engaged in rendering tax, legal, or actuarial services. If tax, legal, or actuarial advice is required, you should consult your accountant, attorney, or actuary. Neither M Financial Group, nor its Member Firms should replace those advisors.
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. File #4844566
Jeremy Heavey
AIF ® , NSSA ® | FINANCIAL ADVISOR
Interested in more?
