12 Smart Year-End Tax Moves to Help Lower Your 2025 Bill
As the end of the year approaches, the clock is ticking on important choices that could help lower your tax bill. With additional deductions and credits from the One Big Beautiful Bill Act starting this year and next, it makes sense to plan for every tax break you can. Here are several strategies to consider before year-end to help trim your 2025 tax bill.
Tax-advantaged accounts
Start by contributing to tax-advantaged accounts. While you have until April 15, 2026 to contribute to an IRA for the 2025 tax year, most workplace retirement plans such as 401(k) or 403(b) plans require final contributions by December 31, 2025. You can contribute up to $23,500 into combined traditional and Roth accounts. If you are 50 or older, you can add $7,500 in catch-up contributions. Those between ages 60 and 63 may be eligible for up to $11,250 in catch-up contributions if their employer’s plan allows it.
Traditional contributions can reduce taxable income dollar for dollar. Health savings accounts (HSAs) are another option if you have a high-deductible health plan. For 2025, you can contribute up to $4,300 for self-only coverage and $8,550 for family coverage.
HSA contributions help lower taxable income, earnings grow tax-free, and distributions for qualified medical expenses are also tax-free. Unlike flexible spending accounts, HSAs do not have a “use it or lose it” rule, so you can save unused funds for future expenses. You can also make outside payroll contributions until April 15, 2026, but payroll contributions provide better tax benefits.
Tax-Loss Harvesting
Consider turning investment losses into potential tax gains. Even with market gains this year, you may have investments that lost value. Tax-loss harvesting allows you to sell investments at a loss, replace them with similar investments, and use those losses to offset realized gains. Remaining losses can offset up to $3,000 of ordinary income each year and carry forward to future years. Be aware of wash sale rules, which prevent you from buying substantially identical investments within 30 days before or after the sale. These rules do not currently apply to cryptocurrencies, so you can sell coins at a loss and repurchase them immediately. Regulations may change, so consult a tax professional.
Roth Conversions
Another strategy to consider is a Roth conversion. This involves transferring money from a traditional IRA or workplace plan to a Roth IRA. You will pay taxes on the converted amount, but future withdrawals are tax-free if certain conditions are met and are not subject to required minimum distributions.
Consider Itemizing Deductions
You may also want to consider itemizing deductions. For 2025, the standard deduction is $31,500 for married couples and $15,750 for single filers. If your deductible expenses exceed these amounts, itemizing could make sense. Deductions include medical expenses, mortgage interest, state and local taxes, charitable contributions, and certain losses.
Medical expenses must exceed 7.5% of adjusted gross income to qualify. If you are close to that threshold, consider paying bills before year-end. The new tax law raises the state and local tax deduction cap to $40,000, with phase-outs for higher incomes, through 2029. Starting in 2026, itemized deductions for those in the top bracket will be capped at 35%.
Deferring Income
Deferring income is another option. If you have freelance or gig income, delaying billing until early next year can reduce taxable income for 2025. Work with your accountant to determine if this strategy fits your situation.
Charitable Contributions and Bunching
Charitable giving offers multiple opportunities. Bunching contributions into one year can help you itemize and maximize deductions. Donor-advised funds allow you to take the deduction now and distribute gifts later. Starting in 2026, non-itemizers can deduct up to $1,000 for single filers or $2,000 for joint filers for cash donations. Itemizers can also donate appreciated assets held for more than a year to avoid capital gains tax. Contributions of cash and unappreciated property, such as clothing or furniture, are deductible with proper documentation.
Gifting to Loved Ones
Gifting to loved ones is another way to help reduce your estate. You can give up to $19,000 per recipient in 2025 without triggering gift tax. Married couples can double this amount. While gifts are not deductible, recipients do not owe income tax on them.
Required Minimum Distributions
If you are 73 or older, do not forget required minimum distributions from retirement accounts. You must take the distribution by December 31 to avoid penalties. Your first RMD is due by April 1 of the year after you turn 73, but waiting that long may result in two distributions in one year, which increases taxable income. Qualified charitable distributions from IRAs can satisfy RMD requirements while avoiding taxes. You can donate up to $108,000 per individual, and QCDs are allowed starting at age 70½.
Think About Your Personal Situation
As 2025 draws to a close, taking time to review your financial situation and act on available tax strategies can make a meaningful difference. From maximizing contributions to tax-advantaged accounts and leveraging deductions to planning charitable gifts and managing investment losses, these steps can help reduce your current tax bill. Every taxpayer’s situation is unique, so consider working with a qualified tax or financial professional to create a plan that aligns with your goals and takes advantage of the opportunities available before year-end.
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This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.