Smart Year-End Tax Strategies: What You Need to Do Before December 31

Year-End Tax Planning Checklist for 2025

As a CPA, one of the things I notice often is that many people only start worrying about saving on taxes when it’s already time to file their return. Unfortunately, once the year has ended, there’s very little room left to take meaningful action. The key to reducing your tax bill isn’t looking back—it’s making proactive moves before December 31.

That’s why planning ahead is critical. Most tax strategies must be completed by year-end, so the best time to start is in the fall—October or November at the latest. This year, tax planning is especially important because the One Big Beautiful Bill Act (OBBBA) has introduced major changes to deductions and tax rules. The choices you make now will directly impact your 2025 return and even the years ahead.

Below is a practical checklist to guide you through the most important tax-saving opportunities to review before year-end.

1. Review and Project Your 2025 Income

The first step in year-end planning is to review your income for the year. By the fourth quarter, you’ll usually have a good idea of where you’ll end up. What matters is not just how much you’ve earned, but how that compares to last year.

If income is higher than last year:

For employees, make sure your payroll withholding is sufficient. Otherwise, you could be hit with an unexpected tax bill in April. For business owners, partners, or S-Corp shareholders, review your expenses now. Consider paying business costs such as rent, supplies, or equipment before year-end. In some cases, you might even accelerate next year’s expenses into this year to reduce taxable income.

If income is about the same:

Stay steady, but double-check both withholding and estimated payments to avoid surprises.

If income is lower than last year:

A low-income year is the perfect time to consider a Roth Conversion. You can move money from a Traditional IRA into a Roth IRA while paying tax at a lower rate. This sets you up for tax-free withdrawals in retirement.

Bottom line: If income is up, look for ways to accelerate expenses. If income is down, consider opportunities like a Roth conversion. The starting point for year-end planning is always a clear picture of your income.

2. Maximize Retirement Contributions and Check RMDs

Always maximize contributions to retirement accounts before putting money into a regular brokerage account. Retirement accounts provide tax deferral—your investments grow without being taxed until you withdraw them. Regular brokerage accounts do not.

2025 contribution limits:

• 401(k) and 403(b): $23,500; plus $7,500 catch-up if 50+; special $11,250 catch-up if ages 60–63. Deadline: December 31, 2025.

• SIMPLE IRA: $16,500; plus $3,500 catch-up if 50+; $5,250 if 60–63. Deadline: December 31, 2025.

• Traditional & Roth IRA: $7,000; plus $1,000 catch-up if 50+. Deadline: April 15, 2026.

Required Minimum Distributions (RMDs):

• Anyone age 73 or older must take RMDs by December 31.

• Missing the deadline triggers a penalty of 25% of the amount not withdrawn.

• In your first year at age 73, you can delay until April 1 of the next year, but then you’ll need to take two distributions in the same year.

• Consider a Qualified Charitable Distribution (QCD) to satisfy your RMD while donating directly to a charity tax-free.

3. Itemized Deductions and Bunching Strategies

SALT Deduction (State & Local Taxes)

From 2025 through 2029, the SALT deduction limit is increased to $40,000 for joint filers ($20,000 MFS). High-income taxpayers may see phasedown rules that reduce this amount, but everyone is guaranteed at least $10,000. This makes it smart to time property tax and state income tax payments before year-end to maximize the deduction.

Itemized Deduction Limits (2026 and beyond)

Beginning in 2026, itemized deductions for high earners will once again be reduced by a phaseout calculation. That means the same charitable gifts or SALT payments may yield smaller deductions. 2025 is the last year to capture full value.

Charitable Giving

Starting in 2026, you’ll only be able to deduct charitable contributions that exceed 0.5% of AGI. In 2025, there’s no such floor, so it’s wise to concentrate giving this year.

Why Bunching Matters

“Bunching” means combining multiple years’ worth of deductions into a single tax year to push your total above the standard deduction. This allows you to itemize in a “fat year” and then take the standard deduction the next.

Tools for bunching include:

• Donor-Advised Fund (DAF): Contribute a lump sum in 2025 for an immediate deduction, while distributing grants to charities gradually over future years.

• Medical expenses: Time procedures or payments so they fall in one year, making it easier to exceed the 7.5% AGI threshold.

• SALT taxes: Pay property taxes or state estimated taxes before December 31 to claim them in the same year.

2025 is the best year to bunch deductions, since SALT limits are higher, itemized phaseouts haven’t kicked in yet, and the charitable 0.5% floor hasn’t started.

4. Manage Investment Gains and Losses

Tax-Loss Harvesting

Selling losing investments to offset gains can feel counterintuitive, especially if you believe the stock will rebound. To stay invested while capturing the tax benefit, avoid the wash sale rule by waiting at least 30 days to repurchase—or buy a similar stock or ETF in the meantime.

Capital Gain Harvesting

In a low-income year, you can sell appreciated assets while in the 0% or 15% long-term capital gains bracket. Since the wash sale rule doesn’t apply to gains, you can sell and immediately repurchase the same stock, raising your cost basis and reducing future taxable gains.

Qualified Charitable Distributions (QCDs)

If you’re 70½ or older, you can donate directly from your IRA to a qualified charity, up to $108,000 in 2025. The transfer must go straight from the IRA custodian to the charity. QCDs reduce your taxable income and also count toward your RMD.

5. New OBBBA Deductions for 2025

The OBBBA created several temporary new deductions starting in 2025:

• Senior Deduction: $6,000 for age 65+, $12,000 for joint filers.

• Tip Income Deduction: Up to $25,000 of eligible tip income. Be sure your W-2 accurately reports tips so you don’t miss this benefit.

• Overtime Deduction: Up to $25,000 (joint) or $12,500 (single) for overtime pay. Double-check your W-2 for proper reporting here as well.

• Auto Loan Interest Deduction: Up to $10,000 of interest on eligible U.S.-assembled vehicles with a first lien.

6. Other Year-End Essentials

• HSA (Health Savings Account): Offers triple tax benefits—deductions on contributions, tax-free growth, and tax-free withdrawals for medical expenses. 2025 limits are $4,300 for individuals, $8,550 for families, plus $1,000 catch-up if 55+. Deadline: April 15, 2026.

• FSA (Flexible Spending Account): Use it or lose it. Any unused balance may be forfeited to your employer at year-end unless your plan allows a small carryover or a grace period. Don’t leave money on the table—schedule medical or childcare expenses before December 31.

• Annual Gift Exclusion: In 2025, you can give $19,000 per person ($38,000 per couple) without gift tax. This is especially valuable for high-net-worth families—transferring assets to children or grandchildren not only removes future appreciation from your estate, but often shifts income into lower tax brackets.

Conclusion

You can’t reduce last year’s tax bill today, but you can take control of this year’s outcome—if you act before December 31. With the OBBBA changes, 2025 is full of opportunities that won’t last.

Review your income, maximize retirement contributions, check your RMD, consider Roth conversions, use bunching strategies, manage your investments, and don’t forget HSAs, FSAs, and annual gifts.

Simply put: Taxes are only reduced with planning, not with hindsight. 2025 offers unique chances that disappear after year-end. Now is the time to review your situation and, if needed, sit down with a trusted advisor to make sure you don’t miss them.