When it comes to your taxes, a little attention now can pay off big time later on as strategic decisions made before the end of the year give you opportunities that might disappear come January. This article discusses this same topic, so let’s dive right into the corresponding strategies.

Maximizing retirement contributions

One of the most effective ways to reduce your taxable income before year-end is to take full advantage of retirement account contributions. Whether you're contributing to an employer-sponsored 401(k) or individual retirement account (IRA), maximizing these contributions can lower your current tax liability as you build your retirement nest egg.

2025 traditional and Roth IRA contribution limits

For the 2025 tax year, you can contribute up to $7,000 with an additional $1,000 catch-up contribution allowed for those aged 50+.

2025 401(k) contribution limits

For 2025, you can contribute up to $23,500 with an additional $7,500 catch-up contribution for those aged 50+ (rising to $11,250 for those between the ages of 60 and 63, specifically).

These contributions are typically made via payroll deductions, so check with your HR or payroll department to increase deferrals before year-end. If your employer offers a match, ensure you’ve contributed at least enough to receive the full benefit to avoid leaving what’s essentially free money on the table.

Considering a Roth conversion

A Roth conversion involves moving funds from a traditional IRA to a Roth IRA, with the converted amount taxable in the year of the conversion and future qualified withdrawals tax-free. This is often especially beneficial in years when your income is lower than usual, putting you in a lower tax bracket, and can also help manage future required minimum distributions (RMDs) that don’t apply to Roth IRAs.

Because Roth conversions must be completed by December 31, year-end is the ideal time to evaluate whether this strategy aligns with your current and long-term financial goals. Consult a tax advisor to estimate the subsequent tax impact and determine if this approach makes sense for your own unique situation.

Harvesting capital gains and losses

Year-end is a critical time to review your investment portfolio and consider capital gain and loss management strategies. Known as “tax-loss harvesting,” this approach allows you to sell underperforming investments to offset gains from other sales: potentially reducing your overall taxable income and lowering your tax bill.

If you’ve realized capital gains during the year (whether from selling stocks, mutual funds, or other investments), you can sell losing investments to offset these; net capital losses can offset up to $3,000 of ordinary income ($1,500 if married but filing separately), and any unused losses can be carried forward to future years—often a valuable tool for managing taxes over time, especially in volatile markets.

Capital gains and losses don’t just affect your tax bill but also influence your adjusted gross income (AGI), which in turn impacts your eligibility for various deductions, credits, and tax brackets. For example, a higher AGI can limit deductions for medical expenses, increase Social Security benefit taxability, or trigger the Net Investment Income Tax (NIIT) for high earners.

While tax-loss harvesting is often beneficial, note you’ll need to avoid running afoul of the wash-sale rule: an IRS rule prohibiting a loss deduction if you repurchase the same or a “substantially identical” security within 30 days of the sale. This applies to purchases in any accounts, including IRAs and even a spouse’s in some situations.

Reviewing charitable giving plans

The benefits of making charitable donations before December 31 are twofold, giving you the means to support a cause you care about while simultaneously reducing your taxable income. Cash donations are the most straightforward way to give, with itemized deductions lowering your taxable income via contributions to qualified charitable organizations. Donating appreciated securities (e.g., stocks or mutual funds) held for more than a year to charity may offer even more benefits as you can generally deduct the asset’s fair market value and avoid paying capital gains tax on the appreciation—more efficient than simply selling the asset and donating the proceeds.

If you're unsure about which organizations to support or want to make a larger gift with long-term impacts, consider contributing to a donor-advised fund (DAF) as these allow you to make a charitable contribution now (and, hence, lock in the deduction for this tax year) with the flexibility to distribute the funds to charities later on—particularly useful in high-income years when you want to take a larger deduction but prefer to spread your giving out over time.

Qualified charitable distributions (QCDs), meanwhile, offer those aged 70½ or older a tax-efficient way to give directly from a traditional IRA: allowing you to transfer up to $100,000 per year directly to a qualified charity, with the amount counting toward your required minimum distribution (RMD) if you're aged 73+. Best of all, QCDs are excluded from taxable income and can thus help reduce your AGI while minimizing the impact on other tax items.

Managing required minimum distributions (RMDs)

Required minimum distributions (RMDs) generally apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored plans such as 401(k)s but not to Roth IRAs (during the original owner’s lifetime). Those who turned (or are turning) 73 in 2025 must take their first RMD by April 1, 2026, a date that shifts to December 31 for each year thereafter. Waiting until April 1 to take your first RMD means taking two distributions in the same year—potentially pushing you into a higher tax bracket—with inherited retirement account beneficiaries also subject to RMDs (rules vary depending on the relationship to the original account holder and the year of inheritance). Failing to take your full RMD by the deadline can result in a 25% excise tax on the amount you should have withdrawn (e.g., if you were required to withdraw $10,000 but only took out $5,000, you could face a $1,250 penalty).

Several ways to reduce RMD tax consequences include the aforementioned qualified charitable distributions and Roth conversions (prior to RMD age). Another option, if you expect to occupy a higher tax bracket in future years, is to consider taking more than the minimum distribution now to reduce the size of future RMDs—while likewise better managing Medicare premiums and Social Security benefits taxation, potentially.

Deferring or accelerating income

Timing is a powerful lever in year-end tax planning. In strategically shifting income and expenses between tax years, you can take advantage of differences in tax brackets, deductions, and other income thresholds to reduce your overall tax burden.

If you anticipate occupying a lower tax bracket next year due to retirement, a career change, or reduced business income, for example, it may make sense to defer income to the following year—perhaps delaying client invoicing, postponing a year-end bonus, or waiting to sell some investments until after December 31 as corresponding strategies. Pushing income into a lower-tax year gives you the ability to reduce the amount taxed at higher marginal rates this year.

On the flip side, if you plan to itemize deductions this year, it may be beneficial to accelerate deductible expenses before year-end (e.g., making an extra mortgage payment, scheduling elective medical procedures, or increasing charitable contributions). Bunching deductions like these into one specific year can help push you past the standard deduction threshold and claim more tax savings in the process.

These timing strategies require careful planning to ensure they align with your broader financial goals, but when executed thoughtfully, are often an effective way to manage your tax exposure.

Taking advantage of tax credits

Tax credits are a powerful way to reduce your tax bill because they lower your tax liability dollar for dollar, unlike deductions—which only reduce taxable income. Year-end is a good time to review any credits you may qualify for and make subsequent moves to ensure eligibility, accordingly. Common tax credits include:

Child Tax Credit (CTC): Provides valuable relief for families with qualifying children under age 17 (for 2025, eligible taxpayers can claim up to $2,000 per child, with income phaseouts starting at $200,000 for single filers and $400,000 for married couples filing jointly)
American opportunity and lifetime learning credits: Available for qualified education expenses such as tuition and required materials
Energy-related tax credits: Sometimes available for those who’ve made energy-efficient upgrades to their home (e.g., installing new windows, insulation, solar panels, or efficient HVAC systems)

To claim any of these credits, you must meet specific criteria and maintain proper documentation (e.g., receipts, manufacturer certifications for energy improvements, Form 1098-T for education expenses, and payment records for dependent care or other qualifying costs). Failing to provide adequate documentation can lead to delays or credit disallowance, making it crucial to gather and organize these materials before year-end.

Planning for healthcare-related tax benefits

Whether you're looking to contribute to a tax-advantaged account, deduct qualified medical expenses, or time procedures strategically, careful planning can help lower your tax bill while addressing important health needs at the same time. Strategies here include…

Maxing out health savings account (HSA) contributions

If you’re enrolled in a high-deductible health plan (HDHP), contributing to a health savings account (HSA) is one of the most tax-efficient moves you can make. For 2025, individuals can contribute up to $4,300 ($8,500 for families), with an additional $1,000 catch-up contribution allowed for those aged 55+. Contributions are tax-deductible, growth is tax-deferred, and qualified withdrawals are tax-free: making HSAs a triple-tax-advantaged tool.

Deducting medical expenses

In itemizing deductions, you may be able to deduct unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI). Qualified expenses include doctor visits, prescriptions, dental and vision care, and even transportation for medical purposes. Many people don’t meet the AGI threshold, however, unless they have unusually high expenses or strategically “bunch” costs into one year: scheduling and paying for multiple medical expenses within the same calendar year to maximize the deduction (e.g., pre-paying dental work, stocking up on prescriptions, or addressing multiple health issues in a single year), especially if you're close to or already over the threshold.

Optimizing elective procedure timing

If you’ve already met your insurance deductible or out-of-pocket maximum for the year, scheduling elective procedures before December 31 can save money and help you reach the AGI medical expense deduction threshold (perhaps extending to surgeries, physical therapy, or even medical devices that need updating). On the flip side, those planning to itemize in the following year may want to delay elective procedures to group those costs together. In planning your health-related spending with tax benefits in mind, you can ease the financial burden of medical care and potentially improve both your physical and financial well-being in the process.

Consulting a professional

Complex financial situations often benefit from the insight and guidance of a seasoned pro; a financial advisor or tax professional can help you make informed decisions in lockstep with your goals and even uncover savings opportunities you hadn’t considered.

Tax rules are notoriously complicated, especially for those whose financial life includes self-employment income, multiple investment accounts, retirement distributions, and/or significant charitable giving. Everyone’s tax situation is unique, and a one-size-fits-all approach therefore often misses the mark. A financial professional can likewise review your income, deductions, credits, and investment strategies to recommend customized actions before the year ends—also assisting with long-term planning strategies requiring careful timing and coordination (e.g., Roth conversions or estate planning).

Involving a tax-savvy professional in your year-end planning not only helps maximize your tax efficiency but also gives you peace of mind knowing your financial decisions are well-informed and aligned with both short- and long-term goals.

The takeaway: year-end tax strategies

As the year draws to a close, a proactive approach to your taxes can make all the difference. Taking the time now to evaluate your financial picture, maximize available deductions and credits, and make strategic moves before December 31st can lead to meaningful savings and a smoother filing season down the road.

Have questions about year-end tax strategies or want to learn more about our tax preparation services? Schedule a FREE discovery call with one of our CFP® professionals so we can help!

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