Maximize Year-End Tax Strategies for 2025

As the end of the year quickly approaches, alongside the joyous holiday season, it's crucial to look into strategic tax moves that could positively impact your 2025 tax return. Here are some proactive steps you might consider:

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Exempt from Filing a 2025 Tax Return? Don’t miss the opportunity to earn tax-free income. If you hold appreciated stock that can be sold tax-free, consider selling it. You might also contemplate a tax-free IRA withdrawal if you qualify.

Filing might still be beneficial even if not required, as missing a refund of tax credits could be a lost opportunity.

Unusually Low Income This Year? Consider converting a traditional IRA to a Roth IRA. The year’s lower income streams might mean a lower tax rate on the conversion. Additionally, if your retirement stocks have depreciated, it may be an optimal moment to convert.

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Children in College? If eligible for education credits like the American Opportunity or Lifetime Learning credits, ensure tuition payments in 2025 maximize your credits. Prepaying 2026 tuition can enhance this benefit when accounted for academic periods starting early 2026.

Home Sale in 2025? Meet ownership and use tests to exclude gains up to $250,000 ($500,000 for joint filers). Partial exclusions may apply for sales due to employment or health changes.

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Adjust Your Health Flexible Spending Account (FSA) for 2025. If underfunded this year, increase contributions to meet predictable costs, with $3,300 as a cap, and $660 allowance carryover to early 2026.

HSA Contributions? Eligible late in the year for an HSA? A full year's deductible contributions are permissible, optimizing tax-deferred benefits and tax-free distributions for health expenses.

Maximize Retirement Contributions before year-end to secure your financial future and benefit from any employer match, reducing taxable income when applicable.

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Boost Contributions for a Non-Working Spouse’s IRA based on your income, optimizing retirement planning even if the working spouse participates in a work retirement plan.

Ages 60 to 64? From 2025, enhanced catch-up contributions ($11,250 for employer plans, $5,250 for SIMPLE plans) are available to boost retirement savings.

Bonus Income? Deferred bonuses till next year could strategically lower taxable income if anticipating lower earnings in 2026.

RMD Considerations for those over 73: Plan the timing of distributions to align with tax strategies, considering dual-year RMD if delayed until 2026.

Manage Stock Losses by offsetting capital gains with under-performing stocks to reduce taxable income, being mindful of wash sale rules.

Capital Gains on Appreciated Stocks? Selling in a year of low income might result in zero capital gain taxes.

Prepay State and Property Taxes as deductions increase under the OBBBA for 2025. Optimize these for the best benefit based on your deduction strategy.

Plan Charitable Deductions by boosting 2025 contributions to tackle the imminent 0.5% floor on deductions starting in 2026. This could impact future deductions, so strategic planning is key.

Charitable Deductions via IRA are an advantageous route for those over 70½, allowing tax-free transfers up to $108,000. This can consolidate tax situations favorably.

Address Outstanding Medical Bills for potential deductions exceeding 7.5% of AGI or plan future expenses in 2025 for optimized deduction capture.

Annual Gift Tax Exclusion stands at $19,000 per individual, enhancing wealth distribution strategies without tax implications.

Under-Withheld Taxes? Adjust withholdings now to prevent penalties, leveraging withholding strategies to correct or mitigate liabilities.

Disaster Losses in 2025? Leverage tax recovery options for federally declared events or assess claiming on prior year returns for optimal benefit.

Energy Tax Credits continue to be available through 2025 for solar and efficiency home improvements, credits like these provide long-term savings and environmental benefits.

For tailored advice on any of these strategies, contact our office today.

Let’s Start a Conversation.
You can count on us for professional guidance along with timely, and reliable tax services. If you’re ready to get started, or just want to start a conversation, then click below.
Learn More
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