Year-End Tax Planning: 10 Moves to Make Before December 31
Year-end tax planning strategies can save you thousands, but many opportunities expire on December 31, 2025. From retirement contributions to tax-loss harvesting, having a comprehensive year-end tax planning checklist can help ensure you don’t miss any critical moves you need to consider before the deadline:
1. Maximize Your Retirement Contributions
Time is running out to fund your tax-advantaged retirement accounts for 2025. Here are the limits:
401(k) or 403(b): $23,500 (under 50) or $30,500 (50+) and an additional catch-up of $3,750 for those ages 60-63.
Traditional or Roth IRA: $7,000 (under 50) or $8,000 (50+). You have until Tax Day 2026 for this year’s IRA contributions.
Business owners: SEP IRAs and Solo 401(k)s offer a combined contribution limit of $70,000 and $81,250 for those ages 60-63.
The choice between a traditional and a Roth retirement account depends on comparing your current tax bracket to the one you expect during retirement. Not sure which is right for you? That’s where guidance from an experienced professional pays off.
2. Consider Roth Conversions
Low-income years are ideal for Roth conversions. Convert traditional IRA funds to a Roth, pay taxes now at your current rate, and enjoy tax-free withdrawals later.
The strategy: Convert just enough to reach the top of your current tax bracket without jumping to the next. This requires careful calculation—the additional income can affect Medicare premiums and Social Security taxation. Done right, it’s a powerful tool that can reduce future RMDs, lifetime taxes, and create more multi-generational tax-free wealth.
3. Harvest Tax Losses (and Gains)
Selling investments at a loss can offset your capital gains and reduce up to $3,000 of ordinary income. Remaining losses carry forward to future years.
Here’s a strategy most people miss: If you’re in a low-income year, consider harvesting gains at a favorable tax rate. This lets you reposition your portfolio while helping to minimize lifetime taxes.
Deadline reminder: Trades need time to settle, which means that if you plan to harvest tax losses before the December 31eadline, those trades should be executed by December 27-28, 2025.
4. Take Required Minimum Distributions
If you’re 73 or older, you must withdraw your Required Minimum Distributions before December 31. Exceptions would allow you to delay taking the first RMD until April 1 of the following year. Otherwise, missing this deadline will result in a 25% penalty on the amount you should have withdrawn.
Don’t need the income? Starting at the age of 70½ or older, you can use a Qualified Charitable Distribution (QCD). Direct up to $108,000 from your IRA straight to charity. This satisfies your RMD and keeps the distribution off your tax return—more efficient than taking the money and donating it separately.
5. Review Your Estate Plan and Gifting Strategy
You can gift up to $19,000 per recipient in 2025 without filing a gift tax return. You and your spouse can each give this amount to unlimited recipients—a powerful wealth transfer tool. Exceeding the annual limit will require an additional tax form at the time of filing that reduces your lifetime gift exemption.
For 529 plans: Contributions may qualify for state tax deductions. Some states require contributions by December 31, 2025, deductions. You can also front-load five years of contributions at once ($90,000 per beneficiary, or $180,000 for married couples). There have also been changes made to 529 rules via the Secure Act, which allow for Roth transfers or penalty-free rollovers later, once the beneficiary is eligible for contributions.
For your estate documents: Review beneficiaries, check if family situations have changed, and ensure documents reflect current tax laws. Small oversights can create big problems for your legacy.
6. Bundle Charitable Contributions
If you donate regularly but can’t itemize deductions, try “bunching.” Concentrate multiple years of giving into one year to exceed the standard deduction threshold, then take the standard deduction in other years.
Donor-Advised Funds make this easier. Make a large contribution in a high-income year, get the immediate deduction, then recommend grants to charities over time. You separate the tax benefit from the actual giving.
7. Maximize Flexible Spending Accounts
Most FSAs are “use it or lose it.” Schedule those appointments, buy eligible supplies, or pay for qualifying childcare now. Check your plan’s rules—some offer a grace period or small carryover, but don’t count on it.
Remember, HSAs are different. Funds roll over indefinitely. Contribute up to $4,300 (individual) or $8,550 (family) for 2025, plus $1,000 if you’re 55+. HSAs offer a triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses. If you can afford to pay medical bills out of pocket, treat your HSA like an additional retirement account.
8. Review Your Withholding and Make Estimated Payments
Self-employed? Have investment income? Major life changes? Review your tax withholding and estimated payments now.
Avoid underpayment penalties by paying either 90% of this year’s tax or 100% of last year’s tax (110% if your AGI exceeded $150,000).
Withheld too little? Make a fourth-quarter payment by January 15 to minimize penalties. Withheld too much? Adjust your W-4 for 2026 so you keep your money instead of giving the government an interest-free loan.
9. Assess Your Insurance Coverage
Year-end is the perfect time to review your coverage. Just got married, divorced, had a new child, or made major purchase? Your insurance needs have changed.
Check your life insurance, disability insurance, and liability coverage. Business owners should also review key person insurance, buy-sell agreements, and liability policies. If your financial situation evolved this year—your coverage should too.
10. Document Your Investment Expenses
Still itemizing deductions? Make sure investment advice, tax preparation, and investment-related expenses are paid and documented before year-end. Recent tax law changes eliminated many of these deductions, but some may still apply to your situation.
The Heritage Difference: Your Personal CFO
These tax planning strategies are powerful—but they’re not one-size-fits-all. The right moves depend on your income, tax bracket, retirement timeline, and overall financial picture.
At Heritage Wealth Solutions, we bring 70 years of combined experience to help you make these critical decisions. We educate you on your options and work alongside you as your personal CFO. You stay in the driver’s seat, informed and confident.
Don’t let year-end pass without maximizing these opportunities. The final weeks of 2025 won’t come back.
Ready to Make the Most of 2025?
Schedule a consultation. We’ll review your situation and identify the strategies that make sense for your financial future. With us, you don’t just receive advice – you gain a partner.
Already a client? Great! Thank you again for putting your trust in us. If anything has changed since we last spoke that may impact your financial plan, schedule a time to connect so we can update your strategy before year-end.
