The end of the year is your last chance to make moves that affect your 2025 tax bill. Some of these strategies take 10 minutes. Others require more thought.
Here’s what’s actually worth considering before December 31.
Max Out Tax-Advantaged Retirement Accounts
This is the single most powerful tax move available to most people, and it’s straightforward: Put more money into accounts that reduce your taxable income.
401(k) limits for 2025:
- Under 50: $23,500
- Ages 50-59 or 64+: $31,000
- Ages 60-63: $34,750 (a new SECURE 2.0 bonus)
If you haven’t maxed out and can afford to, consider increasing your contribution percentage for your remaining paychecks. Even a partial increase helps.
IRA contributions can be made until April 2026 for the 2025 tax year, so there’s less urgency. The limit is $7,000, or $8,000 if you’re 50 or older. Whether you can deduct a traditional IRA contribution depends on your income and whether you have a workplace retirement plan.
HSAs are underrated. If you have a high-deductible health plan, you can contribute $4,300 (individual) or $8,550 (family) to a health savings account. Add another $1,000 if you’re 55 or older. HSA contributions are tax-deductible, the money grows tax-free, and withdrawals for medical expenses are tax-free. That’s a triple tax advantage you won’t find anywhere else. And unlike an FSA, unused HSA money rolls over indefinitely.
Speaking of FSAs: If you have one, check your balance. Most are use-it-or-lose-it by year-end (though some plans allow a grace period or small carryover). Schedule that dental cleaning or stock up on eligible expenses before the deadline.
Consider Tax-Loss Harvesting
If you have investments in a taxable brokerage account that have lost value, you can sell them to “harvest” those losses. The losses offset any capital gains you realized this year. If your losses exceed your gains, you can deduct up to $3,000 against your ordinary income. Leftover losses carry forward indefinitely into future years.
A few things to watch:
The wash sale rule: You can’t sell an investment at a loss and buy it back (or buy something “substantially identical”) within 30 days before or after the sale. If you do, the IRS disallows the loss.
This only applies to taxable accounts. Selling at a loss inside your IRA or 401(k) doesn’t give you a tax deduction.
Don’t let the tax tail wag the investment dog. Selling a good long-term investment just to harvest a loss often backfires. This strategy works best when you are already considering selling, or when you can replace the investment with something similar (but not substantially identical) to maintain your portfolio allocation.
Think About a Roth Conversion
A Roth conversion means moving money from a traditional IRA or 401(k) into a Roth IRA. You pay taxes on the converted amount now, but future growth and withdrawals are tax-free.
This can be smart if:
- You’re in a temporarily low tax bracket (job transition, early retirement, gap year).
- You expect to be in a higher bracket later.
- You want to reduce future RMDs.
- You want to leave tax-free money to heirs.
A warning about the “backdoor Roth”: High earners who can’t contribute directly to a Roth IRA sometimes contribute to a traditional IRA and immediately convert it into a Roth. This works cleanly only if you have no other traditional IRA balances. If you do, the pro-rata rule applies, and part of your conversion will be taxable. This catches a lot of people off guard. If you have old traditional IRA money sitting around, talk to a tax professional before attempting a backdoor Roth.
One more thing: The conventional wisdom that “you’ll be in a lower bracket in retirement” isn’t always true. Once RMDs kick in and Social Security becomes taxable, many retirees find themselves in the same bracket or in a higher one. Run the numbers for your situation.
Take Your RMDs (If Applicable)
If you’re 73 or older, you’re required to withdraw a minimum amount from your traditional retirement accounts each year. Miss it and you’ll owe a 25% penalty on the shortfall (reduced to 10% if corrected within two years).
A few notes:
- The RMD age rises to 75 starting in 2033.
- Roth IRAs have no RMDs during your lifetime. As of 2024, Roth 401(k)s don’t either.
- If you’re charitably inclined, you can make a qualified charitable distribution (QCD) directly from your IRA to a charity. It satisfies your RMD without adding to your taxable income. The 2025 limit is $108,000.
Adjust Your Income Timing
Depending on your situation, it may make sense to push income into next year or pull it into this year.
Defer income if: You’re close to a higher tax bracket, expect to earn less next year, or want to reduce this year’s adjusted gross income for other reasons (like qualifying for certain credits or deductions). Here are a few ways to defer:
- Delay selling appreciated investments until January.
- Ask your employer to hold a year-end bonus.
- If self-employed, send invoices late enough for payment to arrive in 2026.
Accelerate income if: You’re in an unusually low bracket this year, expect higher income next year, or want to recognize gains while rates are favorable.
This is also worth considering if tax rates are scheduled to change. The individual provisions of the Tax Cuts and Jobs Act were extended through 2028 under recent legislation, so there’s less urgency on this front than there was a year ago.
Charitable Giving Strategies
The standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples. Most people don’t have enough itemized deductions to exceed that, which means charitable donations provide no direct tax benefit.
Two workarounds:
Bunching: Instead of giving $5,000 every year, give $15,000 every three years. In the year you bunch, your itemized deductions may exceed the standard deduction, giving you a tax benefit. In the other years, take the standard deduction.
Donor-advised funds: Contribute a lump sum to a donor-advised fund, get the tax deduction this year, and distribute the money to charities over time. This lets you bunch for tax purposes while spreading out your actual giving.
And again, if you’re 70½ or older, a QCD from your IRA to charity is often better than taking the money and donating it. You avoid the income entirely rather than deducting it.
A Note on Professional Help
Some of these strategies are simple enough to handle on your own. Maxing out your 401(k) or spending down your FSA doesn’t require a CPA.
Others get complicated fast. Roth conversions, backdoor Roths with existing IRA balances, tax-loss harvesting across multiple accounts, and income-timing strategies all have nuances that can backfire. If you’re dealing with a complex situation or a significant amount of money, a few hundred dollars for professional advice can easily pay for itself.
The key is getting that advice now, while you still have time to act, not in April when you’re filling out forms.
