As the year comes to a close, it’s worth taking a few minutes to make sure you’ve positioned yourself for tax season. December 31 is an important deadline, as many opportunities to reduce your 2025 tax bill will be off the table afterwards. The good news is that a handful of thoughtful steps now can make a meaningful difference. With a few months remaining in the year, there is still time to discuss, plan, or review nearly all aspects of your 2025 plans.
Here are some of the key areas to consider before the year wraps up:
Review Your Income and Deductions
One of the simplest but most overlooked planning opportunities is the timing of income and deductions. Depending on your situation, you may benefit from pushing income into next year or, alternatively, accelerating it into this year. Similarly, you might consider whether making a charitable contribution, paying certain medical expenses, or bunching other deductible expenses into 2025 could lower your taxable income.
Maximize Retirement Contributions
Retirement accounts continue to be one of the most effective ways to reduce taxable income while saving for the future. Contributions to a 401(k), 403(b), or 457 plan must be made by December 31 to count for 2025. If you haven’t yet reached the annual maximum, now is a great time to catch up. There are also two age ranges that allow for catch-up contributions: 50+ has allowed additional contributions for quite some time, but those ages 60-63 were just recently given an even greater catch-up contribution amount through SECURE Act 2.0. If you are nearing either 50 or 60, or even if you just recently turned these ages, be sure you are hitting your actual maximum and not just the standard maximum for those under 50. The employee salary deferral maximums for 2025 are:
Under age 50:$23,500
Ages 50 and older:$31,000
Ages 60, 61,62, and 63:$34,750
Traditional and Roth IRA contributions for 2025 can wait up until April 15 of 2026, but reviewing where you stand today will help you plan ahead. There is a $1,000 catch-up contribution for 2025 for those 50+, but there is not an additional increase for those 60-63 like the previously mentioned accounts offer.
Take Advantage of Tax-Loss Harvesting
Market volatility can create opportunities. If you have investments that are trading at a loss, you may be able to sell them and use those losses to offset gains elsewhere in your portfolio. Even if losses exceed gains, you can use up to $3,000 of excess losses to offset ordinary income this year, with the ability to carry forward additional losses to future years.
Required Minimum Distributions (RMDs)
For those age 73 and older, RMDs must be taken from retirement accounts before year-end. The penalty for missing an RMD can be steep, so this is an important one to check off the list. If you don’t need the income, you may want to consider directing some or all of your RMD to charity through a Qualified Charitable Distribution (QCD). A QCD can satisfy the distribution requirement while keeping the amount out of your taxable income.
Even if you are under age 73, it is important to plan ahead for what your future RMDs might look like. It could make sense to start taking distributions early, converting tax-deferred assets to Roth IRAs, or increasing your charitable giving to help lower your tax brackets and/or Medicare premiums in the future.
Gifting Strategies
The annual gift tax exclusion for 2025 is $19,000 per recipient. Making gifts before year-end can be a simple way to reduce the size of your taxable estate while supporting family members or other loved ones. For those with larger estates, this can be a valuable part of a longer-term wealth transfer strategy.
Withholding and Estimated Payments
It’s also smart to double-check your tax withholding and estimated payments. If you’ve had a change in income during the year such as a job change, additional bonuses or commissions, investment gains, or a business transaction, you may need to adjust accordingly. Catching up now can help you avoid underpayment penalties and surprise tax bills come April.
Investment and Estate Plan Review
Finally, year-end is a natural time to step back and review your broader financial picture. Are your investments aligned with your goals and risk tolerance? Have there been changes in your family, your income, or tax law that mean it’s time to update your estate plan? Small adjustments today can keep your long-term plan on track.
Final Thoughts
Year-end tax planning isn’t about rushing through a checklist — it’s about making intentional decisions that support your financial goals. By reviewing your income, savings, and investments now, you can close out the year with confidence and set yourself up for a stronger start in 2026.
Key Takeaways:
- December 31 is the deadline for many tax-saving moves.
- Maximizing retirement contributions can reduce taxable income.
- Tax-loss harvesting may help offset gains (or up to $3,000 of ordinary income).
- Don’t miss RMDs if you’re 73 or older — and consider Qualified Charitable Distributions.
- Annual gifting ($19,000 per recipient in 2025) can reduce your taxable estate.
- Review withholding, investments, and your estate plan before year-end.
As always, if you’d like to talk through which of these strategies are most relevant for your situation, our team is here to help.
Matt J Black,CFP®, AAMS®
mblack@larsonfs.com
913-428-2233