Smart, Last Minute Moves That May Lower Your 2025 Tax Bill

Tax Planning Doesn't End on April 15

As the holiday season ramps up and calendars fill with family gatherings, tax planning might not be at the top of your to-do list. That’s understandable. December often feels like a race to the finish line. Still, taking a little time now to review your financial picture could lead to meaningful tax savings before the year officially closes.

Tax planning isn’t only for accountants or high-net-worth households. It’s about making thoughtful choices while you still have time. The good news? There are several simple and legal moves you may still be able to make before December 31 to help reduce your 2025 tax bill.

Revisit Retirement Contributions

Contributing to retirement accounts like a traditional IRA or employer-sponsored plan may reduce taxable income. While employer plan deadlines typically align with the calendar year, some individual contributions can be made up until the tax filing deadline. Still, if you're eligible and haven't maxed out your contributions, now is a smart time to act.

Every extra dollar you contribute now may help lower your current taxable income while supporting your future goals. That’s a win-win worth looking into.

Review Flexible Spending Account Balances

Have a Flexible Spending Account (FSA) for healthcare or dependent care? Many plans follow a use-it-or-lose-it rule by the end of the calendar year. Some may allow limited rollovers or a short grace period into the new year, but those rules vary.

Consider scheduling that long-delayed eye exam or restocking on eligible medical items. It’s better to benefit from the dollars you've already set aside than let them expire unused.

Harvest Tax Losses Strategically

If some of your investments didn’t perform as expected this year, there may be a silver lining. Tax-loss harvesting involves selling underperforming assets at a loss to offset capital gains elsewhere in your portfolio.

This strategy requires careful planning to avoid the IRS’s wash-sale rule, which prevents you from claiming a loss on a security if you purchase a substantially identical investment within 30 days before or after the sale. Still, when done properly, tax-loss harvesting can be a powerful way to reduce your overall tax exposure.

This isn’t about giving up on long-term growth. It’s about using the tools available to work with the current market environment, not against it.

Consider Qualified Charitable Distributions (QCDs)

If you're age 70½ or older and taking required minimum distributions (RMDs) from your IRA, you may be eligible to make a Qualified Charitable Distribution (QCD). A QCD allows you to donate directly to a qualified charity from your IRA. The amount can count toward your RMD while potentially excluding that amount from your taxable income.

It’s a way to support causes close to your heart while possibly improving your tax outlook. As always, consult your tax advisor before making any distribution decisions.

Make Use of the Annual Gifting Exclusion

Gifting can be a thoughtful way to support loved ones and reduce the size of your taxable estate. The IRS allows individuals to gift up to a certain amount per person each year without triggering gift tax. This exclusion resets annually.

If gifting aligns with your long-term financial and estate goals, consider whether there’s someone who could benefit from a financial boost this season. It might be a child working through college, a grandchild starting out, or a nonprofit doing important work.

Fund a 529 Plan for Education Savings

Making a year-end contribution to a 529 college savings plan could benefit both the future student in your life and your state tax return. Many states offer income tax deductions or credits for contributions to a qualified plan.

While 529 plans grow tax-deferred and offer tax-free withdrawals when used for qualifying education expenses, the immediate benefit of a state tax break can add another layer of incentive.

Watch Timing on Deductions and Income

Depending on your income level and whether you itemize deductions, you may be able to accelerate certain expenses or defer income. For example, consider paying January's mortgage or property tax bill in December, or scheduling a medical procedure before year-end.

If you're self-employed, you might delay sending invoices until January or make business-related purchases now that can be deducted this year. These timing moves require careful coordination and documentation, so work closely with your accountant or tax preparer.

Review Your Withholding and Estimated Payments

Surprises can be fun during the holidays; except when they come in the form of an unexpected tax bill. Now is a good time to review your year-to-date withholding and any estimated payments you’ve made. If you’re underpaid, making a final estimated tax payment before the deadline may help avoid penalties.

This is especially important for those who have had a change in income, sold investments, or experienced other one-time events in the year.

Don’t Let Good Intentions Go to Waste

Many people plan to get around to tax planning “when things settle down.” Yet the end of the year always arrives faster than expected. A few hours spent reviewing your financial picture now could result in savings that make a real difference.

Tax strategies shouldn’t feel overwhelming. They should feel empowering. After all, this is your money and your plan.

Let a Professional Help Tie It All Together

While year-end moves can be effective, they shouldn’t be made in isolation. That’s where working with a qualified financial advisor can help. An advisor can evaluate your entire financial picture, including taxes, investments, and retirement goals, to ensure your actions today align with where you want to go tomorrow.

Whether it’s identifying overlooked deductions, coordinating with your CPA, or reviewing your portfolio for harvesting opportunities, having a guide through the process can turn good ideas into real impact.

Planning late in the year doesn't mean it's too late. In fact, now may be just the right time to finish strong and set up next year on a solid foundation.