LEARNING CENTER
Maximize Your Year-End Tax Strategy for 2025
As the year draws to a close and the holiday season kicks in, it's crucial not to overlook the array of tax strategies that could positively impact your 2025 tax filing. Here, we delve into strategic tax planning tactics to enhance your financial outcomes.
Income Below Filing Requirement? If you find yourself in a position where filing a 2025 return isn't mandatory, you might harness the opportunity to generate additional income up to the tax-free threshold. Whether it's selling appreciated stocks without tax implications or taking a permissible, tax-free IRA distribution, there are several untapped methods to optimize your financial stance.
Filing a tax return can also unveil substantial refundable tax credits even when not required, so consider filing to capitalize on these benefits.
Low Income Year? A lower income year presents a strategic opportunity to convert traditional IRAs to Roth IRAs, benefiting from a reduced tax rate. Additionally, if your retirement account stocks have depreciated, it might be a strategic moment for conversion.
College Tuition Planning If you're entitled to education credits such as the American Opportunity or Lifetime Learning Credit, ensure you've met the tuition expenses to maximize these credits. Consider prepaying 2026 tuition if it's applicable to early 2026 to boost your 2025 credits, particularly beneficial for newly enrolled college students.
Home Sale Strategy Meeting the ownership and occupancy tests allows exclusion of home sale gains from taxation, up to specified limits. Even if these conditions aren't fully met, partial exclusions might still apply, particularly for employment or health reasons.
Health Accounts Utilize employer health flexible spending accounts (FSAs) and health savings accounts (HSAs) to your advantage by maximizing contributions and ensuring eligibility, as these accounts offer tax-deductible benefits and tax-free distributions when used for qualifying expenses.
Optimize Retirement Contributions Max out your retirement plan contributions by year-end to ensure full utilization of tax-advantaged savings opportunities. Employer matching can significantly increase your savings, further justifying maximizing these contributions.
Tax Benefits for Non-Working Spouses Even with one spouse retired, capitalize on IRA contributions based on the working spouse’s income to maintain retirement funding benefits.
Expanded Catch-Up Contributions For individuals aged 60 to 64, take advantage of increased catch-up limits in retirement plans starting in 2025, designed to help ramp up savings before retirement.
Deferring Bonuses and Managing RMDs If expecting a bonus, consider deferral opportunities to manage income effectively across tax years. For those aged 73 or older, managing Required Minimum Distributions (RMDs) effectively to avoid dual-year distributions and penalties is essential.
Evaluate Your Portfolio Tax loss harvesting can offset capital gains, reducing taxable income. It's critical to assess stock values and manage wash sale rules to maintain tax efficiency.
Prepaying Taxes Leveraging the increased SALT deduction cap by prepaying state and property taxes can significantly bolster your deductible amounts, provided you aren’t subject to alternative minimum tax.
Maximize Charitable Contributions Planning your charitable contributions strategically allows maximized deductions, especially considering upcoming changes in 2026 with a new 0.5% deduction floor. Tactful planning can also complement adjusted gross income management.
Consider QCDs from Your IRA For those over 70½, Qualified Charitable Distributions can satisfy your RMD, reduce taxable income, and manage Social Security taxation impact.
Medical and Dental Expense Strategies If you’ve hit the deductible threshold of 7.5% of your AGI for medical expenses, consider accelerating payment of outstanding bills or upcoming costs to maximize deductions.
Annual Gift Tax Exclusion Take advantage of the $19,000 limit per recipient to distribute wealth tax-free, effectively managing estate and gift tax considerations.
Avoid Under-Withholding Penalties Carefully review withholdings and estimated payments to meet safe harbor requirements, avoiding costly penalties.
Disaster Loss and Scam Deductions Leverage allowed deductions for losses either from federally declared disasters or scams that affected taxable investments.
Explore these strategies to enhance your tax planning for 2025, ensuring you're leveraging every opportunity for a favorable tax outcome. For personalized advice, feel free to reach out to our office for expert guidance tailored to your unique situation.
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