Key Points
- Timing can play an important part in a tax strategy. Most tax-saving opportunities have December 31 deadlines. Waiting until tax season means you may miss chances to reduce your bill.
- Small moves can help create savings. Simple adjustments like updating your W-4 withholdings or contributing an extra $5,000 to your 401(k) can help shift you to a lower tax bracket or help avoid costly surprises when you file your return.
- Tax planning can help serve you best as a year-round strategy. Working with your financial team throughout the year can help you make informed decisions that align your tax strategy with your broader financial goals and values.
Year-end tax planning for 2025 doesn’t have to be complicated but timing can be important. Many valuable end-of-year tax strategies (from maximizing 401(k) contributions and HSA savings to tax-loss harvesting and charitable giving) have December 31 deadlines. If your goal is to reduce taxable income, avoid filing surprises, and make smarter money moves before the calendar turns, these seven strategies can help you maximize deductions and credits now so you start next year on stronger footing.
1. Dust off your W-4
Did you owe a lot of money on your tax return last year? Or were you surprised by a significant refund check? Either of these scenarios means you may need to update your withholdings on your W-4.
A W-4 form is issued by your employer to determine your tax withholdings from each paycheck. You can revise your W-4 at any time, and it should be updated after a major life event like marriage, children, divorce, a big salary bump, or even a significant asset gain.
Since your W-4 is linked to your taxes, the information must be accurate to help ensure you’re withholding the right amount of taxes each pay cycle. If your tax bill felt off track last year, here are a few things you can do:
- If you were surprised by a significant tax bill, consider raising your withholdings to satisfy your tax requirements.
- If you received a big refund check, you can consider lowering your withholdings and keeping more of each paycheck for yourself. That extra money can be reinvested into your retirement funds, brokerage accounts, emergency fund, or other savings.
Checking in on your withholdings is an underrated way to help bring balance to your taxes.
2. Max Out Your Retirement Contributions
Saving for retirement isn’t just prudent for your future self, it can also help you now by saving you money on your tax bill. Most retirement accounts are tax-advantaged, meaning they offer tax benefits for contributing. Let’s walk through a few accounts you shouldn’t forget about this year.
401(k)
If you have a traditional 401(k), consider assessing your contributions. While you may contribute regularly through payroll deductions, how much have you saved this year? In 2025, you can contribute up to $23,500, with an extra $7,500 for those age 50 and older. If you’re between 60 and 63, you have access to an enhanced catch-up contribution of $11,250.
Since contributions are tax-deductible, when you contribute, you lower your taxable income for the year. Removing $20,000 to $30,000 from your earned income can go a long way in regulating your tax bill.
IRA
You should also check your IRAs. A traditional IRA can work like a 401(k) in that your contributions might lower your taxable income. Whether you receive that deduction depends on your income and if you’re covered by a retirement plan at work. The maximum contribution limit for 2025 is $7,000, with an extra $1,000 available for catch-up contributions by those who are 50 or older.
Keep in mind that if you contribute to both a 401(k) and an IRA, your ability to deduct contributions to your IRA may be impacted.
Have a Roth IRA? Contribute to that as well. Even though contributions aren’t tax-deductible, tax-free withdrawals can be an asset in retirement. Remember, Roth IRAs carry income thresholds, meaning if you make over a certain amount you can’t directly contribute. (The limits start at $150,000 for single filers and $236,000 for married filing jointly in 2025.)
If you have had lower income this year, you could also consider a Roth conversion before year-end. A Roth conversion allows you to roll over funds from your traditional IRA into a Roth IRA. While you must pay taxes on the transfer, it could help save you money in the long run, especially if you expect tax rates to rise in the future.
Health Savings Account (HSA)
Are you enrolled in a high-deductible health plan? If so, consider making additional contributions to a health savings account (HSA). This is a tax-advantaged account designed to help bolster savings for medical expenses.
All contributions are pre-tax, which once again lowers your taxable income, making investing in this account a strategic year-end move. You can put in $4,300 for self-only coverage or $8,550 for family coverage for the 2025 tax year. There is also a catch-up contribution of $1,000 available for those over 55.
One benefit of the HSA is that funds roll over year to year, making it a tactical long-term investment vehicle. Certain employers will even match some of your HSA contributions, but be aware that employer matches count toward your total contribution limits.
3. Defer Extra Income
Another strategy to consider is deferring 2025 income to 2026. While you might be unable to defer your regular paycheck, you could possibly delay a year-end bonus to the start of the new year. For example, if you’re self-employed and report income on a cash basis, you could bill toward the end of December so the payment posts at the beginning of the year.
This strategy only works if you expect to be in the same (or lower) tax bracket for the following year. Should your tax bracket increase, deferring income would only exacerbate things and could have the unwanted effect of increasing your tax bill.
4. Plan Your Deductions
In the quest for tax efficiency, you need to answer this question: Will you itemize or take the standard deduction?
With the standard deduction at $15,000 for single filers and $30,000 for married filing jointly, many families need to think strategically when itemizing deductions. A savvy way to take advantage of itemizing is through bunching or batching donations.
Bunching means you can itemize one year and take the standard deduction the next. For example, you can group charitable contributions, your state income tax bill, property tax, and other deductible expenses to capitalize on itemizing, which could help save you tax money.
You can also batch your charitable contributions. Let’s say you and your spouse usually give $20,000 per year to charitable organizations. Since that number wouldn’t allow you to itemize, you could give $40,000 every other year. This way, you still give the same amount to your favorite organizations while taking advantage of the tax benefits.
5. Consider Donating Your Required Minimum Distributions
If you’re 73 or older, the IRS says you must take required minimum distributions (RMDs) from your IRA every year. These distributions are all 100% taxable. But what if you don’t need the money to cover your expenses?
Qualified charitable distributions (QCDs) offer a strategic way to offset these taxes. QCDs allow you to transfer funds directly from your traditional IRA to eligible charitable organizations. The donation doesn’t count as taxable income and it can satisfy your RMD requirement. The only qualification to complete a QCD is that you must be age 70 ½ or older.
In 2025, individuals can donate up to $108,000 through QCDs. For married couples, both spouses can make QCDs from their respective accounts, potentially allowing for combined donations of up to $216,000.
6. Don’t Forget About Your Flexible Spending Account
Similar to a HSA, a flexible spending account (FSA) allows you to make contributions on a pre-tax basis. Contributions then grow tax-free and distributions remain tax-free for qualified medical expenses.
The difference between an FSA and HSA, however, is that you must use funds in an FSA by the end of the year, or else they expire. (As mentioned earlier, funds in an HSA roll over from year to year.) This means that if you don’t use the money in your FSA annually, you lose it.
You can save $3,300 in an FSA in 2025. If you haven’t taken full advantage of all the money you saved in your FSA account, between now and the end of its cycle is the time to leverage it. Check out the big list of FSA-eligible items and consult your FSAs guidelines – you may be surprised what qualifies.
7. Consider Selling Investments That Aren’t Serving You
Do any investments in your portfolio weigh you down? If so, now might be the time to sell them and harvest your losses. Tax-loss harvesting lets you offset taxes on gains by realizing a loss. You can deduct up to $3,000 in net capital losses against your ordinary income each year, and any losses beyond that amount can be carried forward to future tax years.
A word of caution: Tax avoidance shouldn’t be the sole reason to sell a security. If you sell a stock, buy it back within 30 days, and still attempt to claim it as a capital loss, the IRS considers that a wash-sale and won’t allow the deduction.
Consider working with a financial planner like Abacus Wealth Partners to intentionally rebalance your portfolio in a way that optimizes your tax situation, while retaining the right risk and market exposure for your needs.
Bonus Step: Meet With Your Financial Team
Collaborate with a financial planner and tax professionals to make a plan that works for you. You might be surprised by different strategies, deductions, and credits that could help save you money on your tax bill.
Working with a dedicated financial team to implement proactive tax strategies throughout the year can help lower your tax bill and further your financial efforts. By making smart tax choices in all of your financial decisions, it could help make the end-of-year tax craze much more manageable.
Ready to take your tax strategy to the next level and expand what’s possible with your money? Schedule a time to talk with an Abacus financial planner today.
