5 Strategic Year-End Tax Moves for 2025: Smart Planning Now to Cut Your Tax Bill and Strengthen Your Savings

As 2025 draws to a close, the holiday season may be top of mind—but it’s also prime time to take proactive steps that can reduce your tax bill next spring. The key to smart tax planning is not waiting until April 15 to think about it. Many of the most valuable tax-saving opportunities disappear when the calendar turns to January 1.

By acting before December 31, you can make strategic moves that not only lower your taxable income but also enhance your long-term savings potential. Here are five important year-end tax strategies to consider as you plan your finances for 2025 and beyond.

1. Remember December 31: Key Deadlines That Can Save You Money

While April 15 is the familiar tax-filing deadline, December 31 is just as critical for several important financial moves. Mark this date on your calendar—it could make a meaningful difference in your tax outcome.

Contribute to Tax-Advantaged Retirement Accounts.
You have until April 15, 2026, to contribute to an IRA for the 2025 tax year, but contributions to most workplace retirement plans—such as a 401(k) or 403(b)—must be made by December 31, 2025. The contribution limits for 2025 are:

• Up to $23,500 in total combined traditional and Roth 401(k) contributions.
• If you’re age 50 or older, you can make an additional catch-up contribution of $7,500.
• For workers aged 60 to 63, the new rules allow even higher catch-up contributions—up to $11,250—if your employer’s plan supports it.

Choosing pre-tax contributions can lower your taxable income dollar for dollar, effectively reducing what you owe next April.

Don’t Forget 529 College Savings Accounts.
If you’re saving for a child’s or grandchild’s education, consider making contributions to a 529 plan before year-end. Many states offer state income tax deductions for contributions made by December 31 (deadlines may vary by state).

You can contribute up to $19,000 per beneficiary without triggering the federal gift tax. Or, you can front-load five years’ worth of contributions—up to $95,000 per person per beneficiary—and take advantage of the annual gift tax exclusion in a single year. Just note that doing so means you can’t make additional annual-exclusion gifts to the same beneficiary for the next five years.

Take Your Required Minimum Distributions (RMDs).
If you’re age 73 or older, don’t forget to take your RMDs from traditional IRAs, 401(k)s, and other qualified plans by December 31. Missing this deadline can lead to a hefty 25% penalty on the amount you should have withdrawn (which may be reduced to 10% if corrected within two years).

If this is your first RMD year, you can delay your first withdrawal until April 1 of the following year, but be cautious—doing so may result in taking two distributions in one tax year, increasing your taxable income.

2. Consider Itemizing — Especially After the 2025 Tax Law Changes

While fewer than 10% of taxpayers currently itemize, new legislation and individual circumstances could make itemizing worthwhile again in 2025.

The standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples filing jointly. You should consider itemizing if your eligible deductions exceed those thresholds. Common itemizable expenses include:

• Medical expenses (only the portion exceeding 7.5% of your AGI)
• Home mortgage interest
• State and local taxes (SALT)
• Charitable donations
• Casualty losses from federally declared disasters

The new tax legislation signed in July 2025 significantly changed the SALT deduction cap, raising it to $40,000 for both single and joint filers (up from $10,000). However, the deduction phases out for those with modified adjusted gross income (MAGI) above $500,000, and reverts back to $10,000 for incomes of $600,000 or more. These changes will last through 2029.

If you’re age 65 or older, you can also benefit from an additional $6,000 deduction—phasing out at $75,000 for single filers and $150,000 for couples—which is available through 2028.

3. Make the Most of Losses — Turn Market Declines Into Tax Opportunities

Investment losses can sting, but they can also work in your favor at tax time. Tax-loss harvesting is the strategy of realizing losses to offset realized gains and, potentially, ordinary income.

Here’s how it works:

• Realized losses can first offset realized capital gains.
• If your losses exceed your gains, you can use up to $3,000 per year ($1,500 if married filing separately) to offset ordinary income.
• Any unused losses can be carried forward indefinitely.

If you sell a losing investment and immediately buy back a “substantially identical” security, you’ll run afoul of the wash-sale rule, which disallows the deduction. But one notable exception applies: cryptocurrencies. Because they are not classified as securities, you can currently sell digital assets at a loss and repurchase them right away—locking in the loss without losing exposure. However, this loophole could close in the future, so consult a tax professional before taking action.

Many financial advisors manage tax-loss harvesting for their clients automatically, but if you’re a self-directed investor, it’s worth reviewing your portfolio before year-end.

4. Explore Roth Conversions — Take Advantage of Today’s Tax Rates

A Roth IRA conversion involves transferring money from a traditional IRA into a Roth IRA, paying taxes on the converted amount now to potentially enjoy tax-free withdrawals in retirement.

Here are reasons why 2025 might be a good time to consider one:

• Market volatility could make now an ideal time to convert while account values are temporarily lower, minimizing the taxable impact.
• Although the 2025 tax act made current tax rates permanent, future tax increases remain a possibility—making today’s rates potentially favorable.
• Roth IRAs are not subject to RMDs, giving you greater flexibility and potentially lowering future taxable income.

Remember, once you convert, you’ll owe taxes on the pre-tax portion of the transferred amount, and withdrawals of converted funds must meet the 5-year rule to avoid penalties.

High earners might also look into backdoor Roth or mega backdoor Roth strategies—methods of contributing after-tax dollars to a traditional IRA or 401(k), then converting them into a Roth account. These can be powerful tools for long-term tax diversification.

5. Use Gifting and Charitable Giving to Reduce Your Taxable Estate

The annual gift tax exclusion allows you to give up to $19,000 per recipient in 2025 without incurring gift tax or using your lifetime exemption. If you’re married, you and your spouse can split gifts, allowing you to jointly gift up to $38,000 per person.

These gifts can reduce the size of your taxable estate—an especially important move for high-net-worth individuals planning for generational wealth transfer.

For charitably minded taxpayers, donating to a qualified charity not only supports meaningful causes but can also yield significant tax benefits. If you itemize deductions, you may consider:

• Donor-Advised Funds (DAFs): These allow for an immediate deduction while providing flexibility to decide later how and when the funds are distributed.
• Donating appreciated securities: Giving stocks, bonds, or mutual funds held for over a year allows you to avoid capital gains tax and deduct the full fair market value of the asset.

Starting in 2026, new legislation will allow even non-itemizers to deduct up to $1,000 in cash donations ($2,000 for joint filers). However, keep in mind that itemized charitable deductions will be capped at 35% for those in the highest (37%) bracket starting that same year—so 2025 may be an excellent year to accelerate donations or use a bunching strategy to maximize deductions under the current rules.

Final Thoughts: Plan Ahead for a Smoother Tax Season

Taxes aren’t just a once-a-year concern—they’re an ongoing part of your financial life. By acting before December 31, you can take advantage of opportunities that disappear once the new year begins.

Each of these strategies—whether maximizing retirement contributions, harvesting losses, exploring a Roth conversion, or strategically gifting—can help lower your tax bill while strengthening your overall financial plan.

Because every taxpayer’s situation is unique, it’s always wise to consult a financial or tax professional before making significant decisions. With the right planning today, you’ll not only enter 2026 better prepared—but potentially wealthier, too.