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Year-end tax planning time is in full swing. Don't miss the opportunity to consider how to reduce your taxable income and employ other financial strategies before year-end. Business owners, high earners, and retirees alike: consider these strategies to reduce your tax bill in 2025. But don't sit on this! Nearly all tax saving strategies must be done before year end. 8 Tax Strategies For 2025 Tax Bracket Planning For IRA Withdrawals And Roth Conversions Donate Appreciated Stock Using A Donor-Advised Fund Harvest Losses From A Brokerage Account Max Out Pre-Tax 401(k) Contributions Make A Tax-Deductible IRA Contribution Optimize Distributions From An Inherited IRA Start A Retirement Plan For Self-Employment Income Donate To Charity From Your IRA Optimizing Retirement Withdrawals and Roth Conversions Around Tax Rates Consider if you: have a tax-diversified pool of assets to draw down in retirement. The required minimum distribution age is currently 73, but it doesn't always pay to wait. Retirees should consider their tax situation this year and evaluate whether it makes sense to tap tax-deferred IRAs or do a Roth conversion versus withdrawing from a taxable brokerage account. Roth conversions are very flexible so it's possible to only convert enough to fill up the current marginal tax bracket. And keep in mind, in 2025, married couples filing jointly can have income up to $96,700 and pay 0% on long-term capital gains. Age 65 and older? In 2025, there's a new 'senior deduction.' This $6,000 deduction phases out for Modified Adjusted Gross Income (MAGI) exceeding $75,000 for single taxpayers and $150,000 for married taxpayers. MORE FOR YOU Donate Appreciated Stock Using A Donor-Advised Fund Consider if you: are charitably inclined and have appreciated assets in non-retirement accounts. When you make an irrevocable charitable donation to a donor-advised fund, you receive an immediate federal tax deduction for the fair market value of the asset. By donating appreciated ETFs, mutual funds, or stocks, you avoid triggering long-term capital gains upon the sale of the security and are able to capture more value for your tax dollar and charitable cause. Individuals experiencing a windfall after selling a business or from stock options after an IPO may also want to consider this strategy in high tax years. Note that cash is also eligible to be contributed to a donor-advised fund. To benefit from this tax planning strategy, the taxpayer must itemize tax deductions. A charitable deduction may be taken for the full fair market value of the asset, up to 30% of adjusted gross income (securities) or 60% of AGI (cash). There is a five-year carry forward for unused deductions. Planning note: starting in 2026, a new floor of .5% of AGI will apply to charitable donations, which is another reason to consider bunching charitable donations in 2025. Harvest Losses Consider if you: have unrealized losses in a brokerage account. Whether you're trying to offset a large taxable gain or just have losses to harvest, it may be worthwhile to consider tax-loss harvesting. To estimate possible tax savings, first net short-term gains and losses and long-term gains and losses separately. Then, net the resulting short and long-term figures. This gives you a combined net short or long-term gain or loss. A net loss for the year can be deducted against your regular income up to $3,000. Any remaining losses over this limit can be carried forward to future years. Beware of wash sale rules, especially if you elect to have dividends automatically reinvested. Tax-loss harvesting doesn't make sense in every situation. The strategy is often most advantageous when there are multiple reasons to sell. Max Out Pre-Tax 401(k) Contributions Now - The Roth Rules Are Coming In January Consider if you: have a 401(k) at work. Time is running out for deemed high-earners to make pre-tax catch-up contributions. Starting in 2026, employees age 50 or over can only make catch-up contributions to an after-tax Roth account. 'High earning' is defined as those making more than $145,000 (indexed) in the prior year for the same employer. The earnings limit is expected to be $150,000 in 2026 but has yet to be released. In 2025, the catch-up contribution is $7,500. So if you're in the top 37% marginal tax bracket, that's an additional $2,775 in federal tax next year. If you aren't 50 yet, the 401(k) and 403(b) contribution limit is $23,500. You can't defer more than you earn each pay period, so if you're not on track to maximize pre-tax contributions, do this now. For many workers, this is one of the biggest tax benefits they have. Make A Tax-Deductible IRA Contribution Consider if you: qualify to make a pre-tax traditional IRA contribution based on a moderate income or don't have a 401(k) at work. In 2025, if you are eligible to contribute to an employer retirement plan, you can also make a before-tax IRA contribution if your income (MAGI) is $79,000 or less (single) or $126,000 or less (married). If you are not eligible for an employer plan, single filers and married couples (if both spouses aren't covered by a plan) can contribute pre-tax regardless of income. If one spouse is covered, a fully deductible contribution can be made if income is $236,000 or less. Contribution limits are $7,000 or $8,000 if age 50 and up. Note that if you earn slightly more than the income limits, you may be able to do a partially deductible contribution. Tax tip: due to the very high risk of paying tax twice, we typically advise against non-deductible IRA contributions. Optimize Distributions From An Inherited IRA Consider if you: inherited a retirement account from a parent, friend, or relative after 2019. Nowadays, most beneficiaries who inherit a retirement account from a parent must take the funds in 10 years, or earlier. Essentially, if the account owner was taking required minimum distributions (RMDs) when they died, then the non-spouse beneficiary must too. Look at your income tax rates each year and consider taking more than the minimum amount when you may be in a lower tax bracket. Even if you aren't in a low tax bracket or expect to be before the 10-year window ends, it can still be advantageous to reduce tax overall by equalizing withdrawals. Otherwise, you may be in store for an unavoidable large taxable distribution in the final year. Start A Retirement Plan For Your Self-Employment Income Consider if you: are a business owner or have a side hustle. One of the best ways to lower taxable income is with a retirement plan. If you don't already have a retirement plan, there may still be time to set one up, but you'll need to act fast. Deadlines for plan establishment and funding will depend on how your business is structured, so consult your tax advisor as soon as possible. The 2025 total funding limit (including employee and employer funding sources) for SEP IRAs, Solo or traditional 401(k)s is $70,000. In 401(k) plans, individuals age 50+ can make an extra $7,500 pre-tax catch-up contribution (moving to Roth in 2026 for high earners). Donate To Charity From Your IRA Consider if you: are 70 1/2 or older with a traditional IRA and charitable intent. Many retirees don't know they can give back, right from their IRA. Consider donating directly to charity using a qualified charitable distribution. A check is sent directly from the IRA to the charity you elect. This allows the donor to exclude the gift from taxable income in lieu of charitable deductions. The annual QCD limit is indexed to inflation. In 2025, the limit is $108,000 per account owner. If you want to make a QCD, hurry! Checks need to be cashed by the charity before the end of the year (it takes longer than you think). Year-End Tax Planning Amid A Changing Tax Landscape No one likes paying taxes. Unfortunately, the tax code is complex and constantly changing. So it’s important to work with a tax professional and financial advisor to understand your options and the implications for your entire financial situation and avoid unintended consequences. And keep in mind, this list is hardly exhaustive. For example, business owners should consider the pass-through entity tax election as a SALT cap workaround. And married residents of Massachusetts may want to consider filing separately to reduce the 4% 'millionaire’ surtax. Other strategies include planning around stock option exercises, health savings accounts, deferred compensation, and so forth. But time for year-end tax planning is running out, so start today.
