As the year-end for 2025 approaches, there may be a few things that should be taken into consideration regarding your personal financial situations. Proper actions before January can potentially give you strategic advantages and tax savings if planned correctly. Provided below is a checklist of a few actions that can help you make sure you’re adequately prepared for the 2025 tax year, as well as improve your short and long-term financial health.
Itemizing – If you are near the amount in which you could take the itemized deduction for the 2025 Tax Year (remember, Standard Deductions are currently $15,750 for Single and Married Filing Separately, $31,500 for Married Filing Jointly, and $23,625 for Head of Household), you have some options as to how you can reach the threshold to benefit from itemizing and lowering your tax bill.
- Charitable contributions are the most straightforward means of increasing your itemized deductions – as long as you make these qualified donations before the December 31, 2025 deadline.
- You can also ensure your SALT (State and Local Tax) payments are adequately accounted for, as the recent One Big Beautiful Bill Act (OBBBA) passed legislation that increased the SALT cap from the previous $10,000 to a current $40,000 ($20,000 for MFS), allowing for qualifying taxpayers to deduct a much larger portion of this itemized expense.
- Bunching medical expenses are another means of reaching the itemization threshold, but only if your expenses exceed 7.5% of your Adjusted Gross Income (AGI). If your unreimbursed medical costs are near this percentage, you may be able to schedule qualifying medical or dental procedures before December 31, 2025.
Tax Loss Harvesting – If you have realized capital gains for the year, you are able to sell investments that have lost value in order to offset these gains by up to $3,000 ($1,500 for MFS) worth of capital losses. If you have more than $3,000 in losses in the current year, the amount can carry forward indefinitely, year over year. This strategy is only applicable in taxable brokerage accounts, and does not apply to tax-advantaged accounts such as IRAs and 401(k)s. This can lower (or even eliminate) the tax burden that you would face from your capital gains income.
Rebalancing your Portfolio – There is no better time of the year to look ahead as to what you’d like your risk allocations and asset balances to be within your portfolio. An Investment Advisor could certainly assist you in determining your needs and goals that may be dependent on a changing portfolio risk segmentation or personal desires to allocate your funds in a different manner for 2026 and beyond.
Retirement Planning –There are numerous actions that can benefit your retirement plans and accounts before the year-end. Proper strategy can allow for maximizing tax advantages and saving/investing opportunities. Below are a few areas of coverage that may be applicable to your year-end situation.
- Maximizing employer-sponsored plans, such as 401(k) and 403(b) contributions is one potential move you can make before year-end; if you are under 50, your annual contribution limit is $23,500, and if you are over 50, you are in the “catch-up” tranche of a $31,000 limit, and if you are 60-63, you can contribute up to $34,750 for 2025.
- IRA contributions are another useful strategic implementation that can not only boost your retirement savings, but also provide you with a tax deduction of up to $7,000 for people aged 50 and below, and $8,000 for anyone over 50. It is also to be noted that Modified Adjusted Gross Income (MAGI) limits will impact your ability to deduct the full amount of pre-tax IRA contributions. The deadline to make these contributions is April 15, 2026.
- Roth Conversions can also be completed by the end of the year, which will essentially “convert” your current traditional retirement account holdings into a Roth account that does not tax your growth. You would need to pay applicable taxes on the amounts being converted, and an emphasis on your current and future tax brackets would need to be considered.
- Required Minimum Distributions (RMDs) are taxable amounts required to be taken out of any Traditional IRAs, SEP accounts, Simple IRAs, and 401(k)s before December 31, 2025, if you are aged 73 or older. You will want to make sure these amounts are being taken out in order to avoid a 25% penalty on the amount not withdrawn.
- Qualified Charitable Distributions (QCDs) are a very useful tool for reducing your taxable RMD amount. You are able to transfer up to $108,000 directly from your IRA to a qualified charity, and this will satisfy a partial or full amount of your RMD, making it a highly effective means of lowering or avoiding potential tax payments.
Keep in mind that these are just a few ways to optimize your year-end planning, and everyone’s financial situation is unique.
At John G. Ullman & Associates, our advisors take the time to understand your full financial picture and create strategies tailored to your goals. If any of the topics in this post resonate with you, we invite you to schedule a no-obligation consultation HERE to start the conversation.