Year End Tax Planning: 5 Considerations
October 3, 2025
As 2025 draws to a close, now is the time to think about tax strategies that could help you lower your tax bill when filing season arrives in the spring of 2026. While April 15 may seem far away, several important year-end deadlines and opportunities fall on December 31. Acting before the calendar flips can make a big difference in how much you owe—and how well your financial plan holds up in the new year.
Here are five key strategies to consider as you prepare for year-end tax planning:
1. Mark December 31 on Your Calendar
Most people think of April 15 as the key tax date, but December 31 is equally important. Many contributions and distributions must be made by year-end to count toward your 2025 taxes.
● Retirement contributions: If you participate in a workplace retirement plan like a 401(k) or 403(b), contributions for 2025 must be made by December 31. For this tax year, you can contribute up to $23,500, with an additional $7,500 in catch-up contributions if you’re age 50 or older. Workers between ages 60 and 63 may be eligible for an enhanced catch-up of up to $11,250. Pre-tax contributions reduce your taxable income dollar for dollar, which can result in significant savings.
● 529 college savings plans: Contributions to 529 plans often qualify for state income tax deductions, but deadlines vary by state and many require contributions by December 31. You can give up to $19,000 per beneficiary without triggering federal gift taxes in 2025—or “front-load” five years’ worth of contributions, up to $95,000, in a single year. Just be aware that exceeding annual limits could impact your lifetime gift tax exclusion.
● Required minimum distributions (RMDs): If you’re age 73 or older, you must take your RMDs from traditional IRAs, 401(k)s, or other qualified plans by December 31. Missing the deadline can trigger a penalty of up to 25% of the amount not withdrawn. If it’s your first year taking an RMD, you can wait until April 1 of the following year, but doing so could mean taking two taxable distributions in the same year.
2. Consider Whether Itemizing Makes Sense
The vast majority of taxpayers use the standard deduction, but if your deductible expenses exceed that threshold, itemizing may reduce your tax bill.
For 2025, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly. Those age 65 and older receive an additional deduction—$6,000 for singles and $3,200 for joint filers—subject to income phase-outs.
Expenses that can be itemized include:
● Medical costs exceeding 7.5% of your adjusted gross income.
● Home mortgage interest.
● State and local taxes (SALT). The new law passed in July 2025 raises the SALT deduction cap to $40,000 for most filers, though the deduction phases out for higher-income households and reverts to $10,000 after 2029.
● Charitable contributions, including qualified donations of cash and appreciated assets.
● Casualty and theft losses in federally declared disaster areas.
If you’ve had large expenses this year—such as buying a home, giving generously to charity, or facing high medical bills—run the numbers to see whether itemizing would save you more than the standard deduction.
3. Take Advantage of Tax-Loss Harvesting
Market ups and downs can provide opportunities for tax savings. Tax-loss harvesting involves selling investments that have lost value to offset capital gains elsewhere in your portfolio.
● Losses first offset gains of the same type (short-term against short-term, long-term against long-term).
● Up to $3,000 of net losses can be used to offset ordinary income annually, with the remainder carried forward indefinitely.
● Be mindful of the wash-sale rule, which prevents you from repurchasing substantially identical securities within 30 days of the sale.
One exception currently applies to cryptocurrency, which isn’t subject to wash-sale rules. That means investors can sell coins at a loss and immediately buy them back, recognizing the tax benefit without changing their holdings. However, this loophole could close in the future, so stay informed.
4. Explore Roth IRA Conversions
A Roth conversion involves moving money from a traditional IRA to a Roth IRA. While you’ll pay taxes on the converted amount now, Roth IRAs grow tax-free and aren’t subject to RMDs.
Why consider a conversion?
● If you believe your tax rate is lower today than it will be in retirement, paying taxes now could save money later.
● Market volatility may have temporarily lowered account balances, creating an opportunity to convert at a reduced tax cost.
● Converting can diversify your tax exposure, giving you more flexibility in retirement income planning.
There are also “backdoor” and “mega backdoor” Roth strategies for high earners who exceed income limits for direct Roth contributions. These approaches require careful planning and may involve nondeductible contributions to traditional IRAs or after-tax contributions to workplace plans.
5. Maximize Gifting and Charitable Giving
Year-end is a prime time to give, both to loved ones and to causes you care about.
● Annual exclusion gifts: You can give up to $19,000 per person in 2025 without triggering gift taxes. Couples can combine their exclusions and give $38,000 to a single recipient.
● Charitable giving: Donations to qualified charities can lower your taxable income if you itemize. Options include cash donations, donor-advised funds (DAFs), and gifts of appreciated securities—allowing you to deduct fair market value and potentially avoid capital gains tax.
● New rules starting in 2026: Even non-itemizers will be able to deduct up to $1,000 ($2,000 for couples) in cash donations to eligible charities. However, certain donations, such as to DAFs, won’t qualify.
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For higher earners, note that beginning in 2026, charitable deduction benefits are capped at 35% for those in the top tax bracket, down from 37%. This could make 2025 an advantageous year to accelerate large gifts.
Final Thoughts
The end of the year is a powerful checkpoint for your financial life. From maximizing retirement contributions and reviewing itemized deductions to leveraging tax-loss harvesting and considering Roth conversions, the actions you take before December 31 could help you significantly reduce your 2025 tax liability. Charitable giving and smart gifting strategies can also enhance both your financial plan and your legacy.
Because every household’s situation is unique, consider working with a tax professional or financial advisor to tailor these strategies to your needs. With thoughtful planning now, you’ll be well positioned for a stronger start to 2026—and beyond.
Sources:
https://www.fidelity.com/learning-center/personal-finance/yearend-tax-planning
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.