With the end of 2025 approaching, there is still time to make high‑impact moves that can lower your tax bill and set you up better for 2026. The key is focusing on actions that must be done by December 31 and coordinating them with your broader financial plan, not in isolation.
1. Maximize Workplace Retirement Plan Contributions
For most employer retirement plans, 401(k), 403(b), and similar, the deadline to make salary deferral contributions for 2025 is December 31. Now is the time to confirm your year-to-date contributions and determine whether you can increase your deferral rate on your remaining paychecks to get closer to the annual limit. If you’re 50 or older, don’t forget the additional catch-up contribution allowance.
Business owners with solo 401(k) plans face an additional timing consideration: the plan itself must be established and deferral elections must be made by year-end, even though employer contributions can be funded later (typically by your tax filing deadline, including extensions).
2. Harvest Tax Losses (and Gains) in Taxable Accounts
Tax‑loss harvesting is a tool you can still fully deploy late in the year.
- Review taxable accounts for positions trading below your cost basis and consider realizing those losses to offset gains realized in 2025, plus up to
- $3,000 of ordinary income if losses exceed gains.
- Be careful with the wash‑sale rule: avoid buying the same or “substantially identical” security within 30 days before or after the sale if you want to preserve the loss.
If you are in a low overall tax bracket this year, you might also deliberately realize some long‑term capital gains at favorable rates, effectively “resetting” basis, while in the 0 or 15% long-term capital gains tax bracket.
3. Evaluate a Year‑end Roth Conversion
Roth conversions for 2025 must be completed by December 31, and this year can be attractive for partial conversions depending on your situation.
- Have your advisor and tax professional run a quick projection of your 2025 income to see how much you can convert while staying within your target bracket.
- Consider the ripple effects: higher adjusted gross income can affect Medicare IRMAA surcharges, Net Investment Income Tax exposure, and certain credits or deductions.
A series of smaller, strategically timed conversions over several years often works better than one massive conversion that pushes you into much higher brackets.
4. Optimize Charitable Giving Before Rules Shift
Several analyses highlight 2025 as a key year to front‑load charitable giving before potential changes to itemized deduction rules and floors in 2026.
- If you itemize, consider donating appreciated securities instead of cash to eliminate embedded capital gains while still claiming a deduction, subject to AGI limits.
- High‑income households may want to “bunch” multiple years of giving into 2025 using a donor‑advised fund, then grant to charities over time while capturing a larger deduction this year.
For retirees subject to required minimum distributions, qualified charitable distributions (QCDs) from IRAs can satisfy RMDs and keep the distribution out of adjusted gross income, which can also help with Medicare and other thresholds.
5. Check FSAs, HSAs, and Health‑related Deductions
Year‑end is a natural checkpoint for tax‑advantaged health accounts.
- Many health FSAs are “use it or lose it,” with balances forfeited at year‑end unless your employer allows a limited carryover or grace period—so schedule eligible medical, dental, or vision expenses now if you have remaining funds.
- Health Savings Account (HSA) contributions for 2025 can typically be made up to the April tax filing deadline, but checking now prevents missed opportunities and helps you take advantage of the annual maximum.
Also review whether any major medical procedures, long‑term care premiums, or other deductible health costs should be pulled into 2025 or pushed into 2026 based on your likelihood of itemizing.
6. Satisfy RMDs and Consider Retirement Income Timing
If you are age 73 or older (or otherwise required), you generally must take RMDs from traditional IRAs and certain retirement plans by December 31, with limited exceptions for your first year.
- Confirm that RMDs have been processed from all necessary accounts, especially if you consolidated custodians or changed advisors in 2025.
- Work with your advisor to decide which accounts to tap for RMDs and whether to take more than the minimum this year in light of your long‑term tax bracket expectations and upcoming changes in 2026.
For younger retirees or those with flexible income, think about how much ordinary income to recognize in 2025 versus 2026 by controlling withdrawals, elective bonuses, and business distributions.
7. Use Strategic Gifting and Income/Withholding Adjustments
The last set of moves are small individually but can be meaningful in aggregate.
On the gifting side:
- Consider using your 2025 annual gift tax exclusion to transfer assets to children, grandchildren, or others, especially if those assets are expected to appreciate.
- Coordinate larger gifts with your estate planning attorney to take advantage of current exemption levels and to align with your trust and legacy strategies.
On the income and withholding side:
- Review your 2025 withholding and estimated tax payments; if you are underpaid, you may be able to adjust year‑end withholding or make an estimated payment to avoid penalties.
- If you have control over the timing of bonuses, consulting income, or business invoicing, discuss with your CPA whether it makes sense to accelerate or defer income around year‑end given your bracket and upcoming rule changes.