By Alexia Hope

Copyright researchsnipers

No one wants to hand over more money to the IRS than necessary — and the good news is, you probably don’t have to. Whether you’re a full-time employee, a freelancer, or a small business owner, there are legal strategies that could help you reduce your tax bill if you take action before the end of the year. The key is knowing which ones apply to your situation and acting early enough to take advantage of them.

Try These 5 Tax Strategies

The most effective tax strategies combine immediate benefits with long-term financial planning. You’re positioning yourself for better financial outcomes over time while taking advantage of the tax code’s incentives for behavior that policymakers want to encourage, like saving for retirement, investing in health savings, and supporting charitable causes.

Here are a few strategies you can start with.

Maximize Your Retirement Account Contributions

One of the most powerful tax reduction strategies available is maximizing contributions to tax-advantaged retirement accounts. For 2025, you can contribute up to $23,500 to a 401(k) plan, with an additional $11,250 catch-up contribution if you’re 50 or older. These contributions reduce your taxable income dollar for dollar, providing immediate tax savings while building your retirement nest egg.

If you haven’t been maxing out your 401(k), consider increasing your contribution percentage for the remaining months of the year. Even if you can’t reach the maximum, any increase will provide tax benefits. Many people find that increasing their contribution percentage is less noticeable than they expected because the tax savings partially offset the reduction in take-home pay.

Don’t forget about IRA contributions, which you can actually make up until the tax filing deadline the following year. For 2025, the contribution limit is $7,000, with a $1,000 catch-up contribution for those 50 and older. If you’re eligible for a traditional IRA deduction, this contribution can reduce your current-year taxes.

Self-employed individuals have even more powerful options, including SEP-IRAs and Solo 401(k)s that allow much higher contribution limits based on self-employment income. These accounts can provide substantial tax savings for freelancers, consultants, and small business owners.

Utilize Tax-Loss Harvesting in Your Investment Accounts

If you have taxable investment accounts, tax-loss harvesting can help reduce your tax bill while rebalancing your portfolio. This strategy involves selling investments that have declined in value to realize capital losses that can offset capital gains from other investments or reduce your ordinary income by up to $3,000 per year.

The key is to avoid the wash sale rule, which prevents you from claiming a loss if you repurchase the same or substantially identical security within 30 days. You can immediately reinvest the proceeds in similar but not identical investments to maintain your market exposure while still capturing the tax benefit.

If you have more losses than gains in a given year, you can carry forward the excess losses to future years, making this strategy valuable even in years when you don’t have significant capital gains to offset. This makes tax-loss harvesting particularly effective as part of a long-term tax management strategy.

Maximize Health Savings Account (HSA) Contributions

If you have access to a Health Savings Account through a high-deductible health plan, maximizing your HSA contributions provides what many consider the best tax deal available. HSAs offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.

For 2025, you can contribute up to $4,300 for individual coverage or $8,550 for family coverage, with an additional $1,000 catch-up contribution if you’re 55 or older. Unlike flexible spending accounts, HSA funds roll over year after year and become portable if you change jobs.

Many people underestimate the long-term potential of HSAs. After age 65, you can withdraw HSA funds for any purpose (not just medical expenses) without penalty, though you’ll pay ordinary income tax on non-medical withdrawals. This makes HSAs function like traditional IRAs with the added benefit of tax-free withdrawals for medical expenses throughout your lifetime.

If you can afford to pay medical expenses out of pocket and let your HSA investments grow, you’re essentially getting tax-free investment growth that can be accessed tax-free for medical expenses at any time in the future.

Strategic Charitable Giving and Bunching Deductions

Charitable giving can provide significant tax benefits, especially when combined with strategic timing and the technique known as “bunching” deductions. Since the standard deduction is now quite high, many taxpayers don’t have enough itemized deductions to exceed these thresholds.

Bunching involves concentrating multiple years’ worth of charitable donations and other itemized deductions into a single tax year to exceed the standard deduction threshold, then taking the standard deduction in the following years. This strategy can provide greater total tax savings than spreading donations evenly across multiple years.

Business Expense Optimization and Equipment Purchases

If you’re self-employed or own a small business, there are numerous opportunities to reduce taxes through legitimate business deductions. The key is ensuring that expenses are ordinary, necessary, and properly documented for your business activities.

Consider accelerating business equipment purchases before year-end to take advantage of Section 179 depreciation or bonus depreciation rules. These provisions allow you to deduct the full cost of qualifying equipment in the year of purchase rather than depreciating it over several years.

Don’t overlook smaller business deductions that can add up to significant savings. This includes home office expenses if you qualify, business meals, professional development, software subscriptions, and business-related travel expenses. Keep detailed records and receipts to support these deductions.

If you’re employed but have unreimbursed business expenses, these are no longer deductible under current tax law for most employees. However, if you’re a statutory employee or in certain professions, you may still be able to deduct business expenses.

Taking Action Before Year-End

The most important aspect of tax planning is timing. Many of these strategies must be implemented by December 31st to affect your current year taxes. Start by reviewing your current tax situation and identifying which strategies might provide the greatest benefit for your circumstances.

Remember that tax laws change regularly, and what works well under current law might not be as effective in future years. Focus on strategies that provide benefits under current law while building a foundation for long-term financial success, regardless of future tax code changes.