As the year winds down, so does your window to make strategic financial decisions that can lower your next tax bill. Smart year-end tax planning isn't just for big corporations, it's for anyone who earns, invests, or owns a business.
Between October and December, a few well-timed actions can help you reduce taxable income, take advantage of credits, and start 2026 in a stronger financial position.
Here are five practical moves worth considering before the clock runs out.
1. Boost Retirement Contributions
If you haven't maxed out your retirement accounts, now's the time to check your balances. Contributions to 401(k)s, 403(b)s, and traditional IRAs can lower your adjusted gross income (AGI) while helping you build long-term savings.
- The 2025 contribution limit for 401(k)s is $23,000 (plus $7,500 in catch-up contributions if you're over 50).
- IRA contributions are capped at $7,000 (or $8,000 with the catch-up).
- If you're self-employed, a SEP IRA or Solo 401(k) can allow even higher contributions, potentially reducing both personal and business taxes.
Every dollar contributed before December 31 is a dollar not taxed this year.
2. Make the Most of Charitable Giving
Donations to qualified charities remain one of the simplest ways to lower taxable income while supporting causes you care about.
To get the most benefit:
- Donate appreciated stocks or mutual funds instead of cash, you'll avoid capital gains tax and deduct the full market value.
- If you're 70½ or older, consider a Qualified Charitable Distribution (QCD) from your IRA, it counts toward your Required Minimum Distribution (RMD) but isn't included in income.
- For larger or recurring donations, a donor-advised fund can let you claim the deduction this year and distribute funds later.
If you itemize deductions, charitable giving can meaningfully reduce your 2025 tax bill.
3. Time Income and Expenses Wisely
A classic move for both individuals and small business owners is to shift income and deductions to the year they'll have the biggest impact.
- If your income was unusually high in 2025, defer bonuses or invoices until January.
- If your income was lower this year, consider accelerating income to fill lower tax brackets.
- Prepay deductible expenses (like property taxes or business purchases) before December 31 to capture the deduction this year.
This "income smoothing" strategy helps you stay within a favorable tax bracket and avoid unexpected jumps in taxable income.
4. Review Investments for Gains and Losses
Year-end is the perfect time to look at your portfolio through a tax lens.
Tax-loss harvesting, selling losing investments to offset capital gains, can reduce your overall tax bill. If your losses exceed your gains, you can offset up to $3,000 of ordinary income, with any extra losses carrying forward.
Be careful with the wash sale rule, which disallows the deduction if you repurchase a similar investment within 30 days. A simple way around this is to switch to a similar, but not identical, fund or ETF.
Even if you don't harvest losses, reviewing unrealized gains and rebalancing before year-end ensures your portfolio aligns with both your risk and tax goals.
5. Run a Year-End Withholding and Estimate Check
A quick withholding review can prevent surprises at tax time.
If you've had:
- A new job or second income stream
- Major investment gains
- Changes in marital status
- Large freelance or 1099 earnings
…it's smart to confirm your W-4 settings or make an estimated payment by mid-January. Paying now can help you avoid underpayment penalties and smooth out your cash flow before filing season.
Year-end tax planning is about timing, not guesswork.
A few deliberate steps, adjusting contributions, rebalancing investments, or planning charitable gifts, can make a measurable difference on your 2025 return.
Tax laws evolve every year, so what worked last season may no longer apply. Staying proactive through December ensures you're not leaving easy tax savings on the table.
How Margen Can Help
If you're unsure which moves actually apply to you, Margen can help you verify your options before the year ends. You can ask it questions like:
- "Do I qualify for the $500,000 home sale exclusion?"
- "Will bunching my donations this year lower my taxes?"
- "Should I defer my freelance income into January?"
Margen uses the same IRS rules in publications like Pub. 523 and Pub. 590-A, so you can make confident, verifiable decisions before December 31.