2025 Year-End Financial Checklist

1. Income & Investments

Defer or reduce income

• Income: Defer your year-end bonus, the sale of capital gain property and receipt of distributions to delay income to the following year.
• Deductions: Take your deductions (pay your 2025 Q4 state income tax payment, medical expenses, deductible interest and alimony payments before January 1, 2026).
• W-2 withholding: Increase your W-2 federal income withholding amount in preparation for a significant tax bill or to avoid the under-withholding tax penalty.
• Alternative Minimum Tax: If you are subject to the Alternative Minimum Tax (AMT), or if you are close to being in the AMT, be sure to speak with your CPA or other tax advisor before implementing these strategies.
• *SALT Deduction Cap Expansion: Deduct up to $40,000 in state and local taxes ($20,000 if married filing separately) for 2025–2029 if you itemize. Review total state and local tax payments to maximize the deduction.
• Qualified Business Income Deduction: Maximize your deduction by reviewing 2025 business profits and expenses to deduct up to 20% of qualified business income if you are self-employed or own a small business set up as a pass-through entity.

Offset capital gains

• Tax-loss harvesting: Harvest your losses by selling taxable investments, keeping in mind short-term losses are most effective at offsetting capital gains. Note: Wait at least 31 days before buying back a holding sold for a loss to avoid the IRS wash-sale rule.
• Mutual funds: Evaluate if you should delay purchasing mutual fund shares until after January 1, 2026 to avoid capital gains taxes on brand new investments. 

2. Retirement Planning

• IRA: Maximize your IRA contributions. For 2025, the maximum IRA contribution is $7,000, or $8,000 if you’re 50 and above.
• *401(k): Maximize your 401(k) contributions. For 2025, the limit is $23,500 if you’re under 50, $31,000 if you’re 50–59 or 64 and older, and up to $34,750 if you’re 60–63 depending on your plan.
• Direct rollover distribution: Consider making a direct rollover distribution to an eligible retirement plan, including an IRA. Compare the costs and the available investments, tools, and features between the current plan and the new plan prior to making a move.
• Employer stock: Explore taking employer stock under favorable tax rules.
• Social Security: Determine the best time to begin taking Social Security benefits, which you can apply for between ages 62 – 70.
• Required Minimum Distribution: If you’re age 73 and above, take your Required Minimum Distribution (RMD).

3. Gifting Strategies

Gift to loved ones

• *Gift Tax: Gift up to $19,000 per recipient annually in federal tax-free gifts. If you’re a married couple, you can give up to $38,000 per recipient annually.
• Bequest: Make a will or trust bequest so that the estate can take both income and estate tax deductions.

Gift to those in need

• Cash: Give an outright charitable gift of cash for an immediate income tax deduction.
• Stock: Contribute to charities using appreciated stock in place of cash to reduce capital gains in your portfolio while generating an income tax deduction.
• *Qualified Charitable Distribution: If you are over 70½, you can donate up to $108,000 from your IRA directly to a charity and avoid paying income taxes on the distribution.
• Donor Advised Fund: Set up a Donor Advised Fund for an immediate income tax deduction, subject to limitations, and provide immediate and future donor gifting to charity over time.
• Private Foundation: Set up a Private Foundation for an immediate income tax deduction, subject to limitations, and provide complete control over current and future charitable giving.

4. Account Reviews

• *Health Savings Account: If enrolled, review your Health Savings Account (HSA) contributions. For 2025, the maximum HSA contribution, inclusive of amounts contributed by your employer, is $4,300 for individuals and $8,550 for families, plus an additional $1,000 if you’re 55 and above.
• Flexible Spending Account: Confirm you’ve spent the entire balance in your Flexible Spending Account (FSA) for the year as any money not used may be lost. Consider stocking up on qualified expenses, from over-the-counter medications to contact lenses, to use up leftover funds. 
• 529 Plan: Revisit contribution amounts to your 529 Plan school savings accounts. Note: Contribution limits vary by state.
• Medicare Part D: Review your Medicare Part D plan and make any changes during open enrollment, which begins in October.

5. Review 2025 & Plan for 2026

• Financial plan: Review the past year and plan for next year with your advisor with the goal of gaining clarity in your current situation and direction for tomorrow. Update them on major life events from the past year and share any that are on the horizon (e.g employment, marriage, divorce, children, retirement). Review your spending and share any significant upcoming expenses to make updates to your budget and financial goals (e.g. real estate, college tuition, wedding). 
• Investment roadmap: Revisit your account preferences, risk tolerance and investment objectives and ensure they’re all up to date. 
• Year-end projection: Send capital gains and investment income information to your accountant for an accurate year-end projection.
• Beneficiaries: Review your beneficiary designations and update them as necessary.

This article is intended for informational purposes only and should not be taken as a recommendation to invest in any asset class or foreign securities market. All investments involve risk including the loss of capital. Certuity is not a tax advisor. All decisions regarding the tax implications of your investments should be made in consultation with your independent tax advisor.