6 Smart Strategies to Lower Your Taxes in 2025—Start Now to Maximize Your Refund Next Year

As we move into the heart of summer, many people are still breathing a sigh of relief after wrapping up their 2024 tax returns. But if you’re hoping to pay less in taxes next year or even boost your refund, the best time to start planning isn’t in March or April—it’s right now.

Tax planning is a year-round endeavor, and getting ahead of it while there’s still time can help you reduce your 2025 tax bill, avoid surprises next April, and keep more of your hard-earned money. Whether you’re a full-time employee, a freelancer, a parent, or a retiree, there are concrete, actionable steps you can take today that may result in significant tax savings tomorrow.

Here are six strategies you can consider implementing now to help lower your taxes in 2025:

1. Revisit and Adjust Your W-4 Withholdings

Most taxpayers file their W-4 form once—usually when starting a new job—and never think about it again. But that “set it and forget it” approach can lead to withholding too much (which gives the IRS an interest-free loan) or too little (resulting in a surprise tax bill).

The IRS W-4 form tells your employer how much federal income tax to withhold from your paycheck. If your life has changed since you last filled it out, it’s time for a revision. Consider adjusting your W-4 if:

• You had or adopted a child: You may now be eligible for the Child Tax Credit (CTC)—up to $2,000 per qualifying child under 17.
• You started a side hustle or freelance gig: This income likely isn’t taxed automatically. Consider increasing your withholding at your primary job or setting up estimated quarterly tax payments.
• You plan to itemize instead of taking the standard deduction: Reflecting this on your W-4 can reduce how much tax is withheld from your paychecks.

A large refund or tax bill from your 2024 filing is often a red flag that your W-4 might need an update. Your HR department can walk you through the process of submitting a revised form.

2. Use Tax-Loss Harvesting to Offset Gains

Tax-loss harvesting is a time-tested technique used to reduce your taxable capital gains. It works by selling investments in your taxable account that are currently at a loss and using those losses to offset gains from other investments—or up to $3,000 of ordinary income annually.

Here’s how to do it smartly:

• Sell losing positions in your taxable portfolio.
• Immediately reinvest in similar (but not identical) securities to maintain your asset allocation and market exposure.
• Watch out for the “wash-sale” rule: If you repurchase the same or a “substantially identical” security within 30 days before or after the sale, the loss becomes disallowed for tax purposes.

This strategy is especially useful in volatile markets when some positions may have temporarily dipped, providing a tax-savings opportunity while staying invested.

3. Reevaluate Whether You Should Itemize

For 2025, the standard deduction will be around $15,000 for individuals and $30,000 for married couples filing jointly. However, if you’ve had high out-of-pocket medical expenses, bought a home, or made large charitable donations this year, you might benefit from itemizing instead.

Here’s what can be itemized:

• Medical and dental expenses (if they exceed 7.5% of your adjusted gross income)
• Mortgage interest
• State and local taxes (SALT), up to $10,000
• Charitable donations
• Losses from federally declared disasters

If you’re close to the threshold, consider “bunching” deductions—for example, making two years’ worth of charitable contributions in one year—to tip the scale in favor of itemizing.

Now is the time to start organizing receipts and documenting expenses, so you’ll be ready to itemize when tax season rolls around.

4. Maximize Pre-Tax Contributions to Retirement and Health Accounts

One of the most effective ways to lower your taxable income is by contributing to pre-tax savings accounts. These include traditional 401(k)s, IRAs, and Health Savings Accounts (HSAs).

Here are the contribution limits for 2025:

• 401(k)/403(b): $23,500 ($7,500 additional catch-up for those age 50+, $11,250 catch-up for ages 60–63)
• Traditional IRA: $7,000 ($8,000 for age 50+); contributions can be made up to the April 2026 filing deadline
• HSA: $4,300 for individuals, $8,550 for families, plus a $1,000 catch-up for those age 55+

HSAs are particularly powerful: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. After age 65, withdrawals for non-medical expenses are taxed like a traditional IRA, but with no penalties.

Every dollar you put into these accounts today can lower your taxable income while helping you build long-term wealth.

5. Prepare Early for Required Minimum Distributions (RMDs)

If you’re approaching age 73, it’s time to prepare for Required Minimum Distributions (RMDs) from your traditional retirement accounts. These mandatory withdrawals are taxable and must be taken each year once you reach the required age.

Under the SECURE 2.0 Act:

• The RMD age is 73 for those born between 1951–1959
• It will rise to 75 for those born in 1960 or later
• The penalty for failing to take an RMD has dropped from 50% to 25%, or just 10% if you correct the mistake promptly

To reduce the tax impact, consider:

• Roth conversions before you hit RMD age
• Qualified charitable distributions (QCDs) if you’re 70½ or older, which allow you to donate directly from an IRA to charity, satisfying RMDs without increasing your taxable income

6. Explore a Roth Conversion Strategy

A Roth conversion involves moving funds from a traditional IRA into a Roth IRA. You’ll pay taxes on the amount converted, but future growth and qualified withdrawals from the Roth account will be tax-free—and Roth IRAs have no RMDs.

A Roth conversion may be especially wise if:

• You’re currently in a lower tax bracket than you expect to be in retirement
• Your investments have temporarily dropped in value, reducing your conversion tax burden
• You want to diversify your retirement income streams for future flexibility

For high earners, consider a backdoor Roth IRA, which lets you sidestep income limits by making nondeductible contributions to a traditional IRA, then converting the funds to a Roth IRA. It’s a complex strategy, so it’s important to consult a tax advisor before proceeding.

Final Thoughts: Start Early, Save More

While tax filing for 2025 may feel like a distant concern, the moves you make today can significantly impact your bottom line next April. From adjusting withholdings and harvesting losses to contributing to retirement accounts and planning Roth conversions, there are multiple levers available to reduce your tax liability and maximize your financial health.

Tax rules are complicated and ever-evolving, so it’s always smart to work with a CPA or financial advisor to tailor these strategies to your individual goals and situation. By planning ahead and taking strategic action now, you’ll be setting yourself up for a smoother, less stressful, and potentially more rewarding tax season in 2026.

The sooner you start, the more you can save.