As 2025 comes to a close, it’s a great time to tie up any financial loose ends and position yourself for a successful start to the new year. One area that often deserves attention is your tax situation. While taxes aren’t the most festive topic, taking proactive steps now can lead to meaningful savings, and that’s certainly something to celebrate!
Reviewing your finances and implementing smart year-end tax strategies can help you reduce your tax liability, optimize deductions, and set yourself up for greater financial confidence in 2026. Even small adjustments now can make a big difference when tax season arrives, giving you peace and a head start on your new year’s goals.
1. Harvest Your Tax Losses
The IRS allows investors to offset their capital gains with similar capital losses. If you happen to be holding a losing investment, now might be a good time to sell it so that you can use the loss to offset your capital gains (profits taken) for this year and therefore lower this year’s tax bill. Losses over gains in a tax-year may be deductible up to $3,000 and the remainder “carried over” to future years. Be aware of the “wash-sale” rule regarding capital losses if you plan to repurchase the losing investment at a later date.
In a similar manner, if you have excessive carry-over losses from a prior year(s), you might consider “harvesting gains.” In this approach, you sell profitable holdings to realize the gains and offset those gains with the carry-over losses. With the last three years of sizable gains in the stock market, it may be a good time to explore whether this strategy may work for you.
2. Give to Charities
Contributing to charity can lower your tax bill if you itemize your deductions. And it doesn’t have to be just money that you donate. Clean out your closet and kitchen cabinets and take a box over to your local 501(c)(3) thrift store. As long as they give you a receipt for the donation, you will be able to itemize and deduct whatever the fair market value is for the items. If you donate regularly to charity each year and your total itemized deductions are close to the standard deduction, you might consider bunching multi-year charitable contributions into one tax year, itemizing in that one year and saving on taxes over multiple years. (See Donor-Advised Fund below.)
If you have appreciated stock, you can get an even greater benefit by donating it to charity. You get to deduct the fair market value of the stock as a charitable contribution and the charity is not liable for the capital gains taxes.
3. Open a Donor-Advised Fund
With the higher standard deduction now in place under the One Big Beautiful Bill Act (OBBBA), many of those who are charitably inclined are considering donor-advised funds. Donor-advised funds work as charitable giving savings accounts where you get a deduction when you put the money into the fund, not when you distribute it to a charity.
If your itemized deductions are close to the standard deduction, you can open a donor-advised fund and put a large sum of money into it in 2025. You get to take the tax deduction for this year but hand the money to charities over time. Then, in 2026 and afterwards, you may not have deductions for your charitable giving, but you can still take the standard deduction. (1)
4. Take Your Required Minimum Distribution (RMD) and Consider a Qualified Charitable Distribution (QCD)
You are required to take minimum distributions from your retirement accounts (except Roth IRAs) by April 1st the year following your 73rd birthday. After that, the money must come out of your account by December 31. If you’re charitably-inclined, you can use the qualified charitable deduction strategy and donate the RMD directly to a charity of your choice up to $108,000. The charitable deduction offsets the taxable distribution for tax purposes.
5. Max Out Your Retirement Account
Another way to lower your income, and therefore your tax bill, is by deferring that income until retirement. In 2026, you can contribute up to $24,500 to a 401(k) plan, which will remove that money from your current taxable income. If you are 50-59 years old or 64 and over, your yearly contribution limit goes up to $32,500. Those aged 60-63 are entitled to a “super catch-up” contribution where their total maximum is $35,750. You can put up to $7,500 in any type of IRA; $8,600 if you are over age 50.
6. Consider a Roth Conversion
If you have lower income than normal in 2025, then it might make sense to convert your traditional IRA to a Roth or even do a partial conversion. In doing so, you would pay the income taxes on the money now, at your 2025 rates, so that you could take all withdrawals tax-free in retirement.
If you are on Medicare or utilize the new “extra standard deduction” for those over 65 years old, be aware that even a partial Roth conversion could increase your taxable income. This income increase could push you into higher IRMMA income brackets that determine how much you’ll pay for Medicare - Part B and Part D premiums two years from now. In addition, the special extra standard deductions for seniors have income phaseouts, so a Roth conversion may push you into a phaseout range where you wouldn’t be allowed the extra standard deduction.
Another benefit of having your money in a Roth account is that it is not subject to required minimum distributions as discussed above. Once your money is in a Roth IRA, you can leave it in there to grow as long as you’d like.
7. Take Advantage of Your HSA
If you have access to a health savings account (HSA) with your high-deductible health plan, you can enjoy triple-tax savings with no federal income tax, no state or local taxes, and no Federal Insurance Contribution Act (FICA) taxes. Your contributions are tax-deferred and withdrawals are tax-free for medical expenses.
Since your balances roll over from year to year, you can max out the account without worrying about using it up right away. For 2025, the contribution limit is $4,300 for an individual and $8,550 for a family, with a $1,000 catch-up bonus for those over 55.
8. Prepay Tuition
If you have a college student, consider paying next term’s tuition before December 31. Any tuition you pay for the first four years of undergraduate study is eligible for the American Opportunity Tax Credit, subject to income eligibility limitations. This credit may save you up to $2,500 per student on your tax bill depending on your expenses and income. If you are the one doing the studying, you may be eligible for the Lifelong Learning Credit.
9. Contribute to a 529 Plan
If you’re still working on saving for your children’s college education, then you may benefit from putting some money into a 529 plan before the year’s end. This won’t help with your federal tax bill, but it might lower your state taxes. Many states allow deductions for contributions to the state’s 529 plan and some even allow them for contributions to other plans.
10. Reach Out for Help With Year-End Tax Strategies
Even during the busy holiday season, there are smart tax strategies you can implement in the final weeks of the year to safeguard your finances.
Would you like some guidance on putting these strategies into action? At Anderson Financial Strategies, our wealth managers make complex advisory strategies brilliantly simple. We honor our fiduciary duty above all else and communicate with full transparency, so you always understand the “why” behind every recommendation.
Our science-based investment approach and relationship-driven service are designed to give you clarity and confidence—especially during key planning moments like year-end.
If you want a financial partner who simplifies the complex and helps you feel excited and confident about your future, we’d love to support you. Get in touch by calling us at 855-237-4545 to schedule an executive briefing to discuss your goals.
About Shon
Shon Anderson is president and chief wealth strategist at Anderson Financial Strategies, LLC with over 20 years of experience. As a fiduciary, Shon’s mission is to provide his clients with quality financial expertise along with rapidly responsive service through an honest relationship. He specializes in providing family office-style services to help his clients organize and focus their financial life. Shon graduated from Wright State University with a bachelor’s degree in financial services and an MBA in finance. He is a CERTIFIED FINANCIAL PLANNER® practitioner and holds the Chartered Financial Analyst® (CFA®) certification. His insights have been quoted in leading financial news publications such as CNBC, Yahoo Finance, Fox Business, Consumer Reports, Forbes, Bankrate.com, Investment News, and Kiplinger. Shon serves as president of the CFA Society Dayton as well as on the boards of the Miami Valley Hospital Foundation and Wright State’s planned giving council and was appointed as a Trustee for Central State University. Shon and his wife, Jessica, reside in Sugarcreek Township, Ohio, and are blessed with triplet daughters, Elizabeth, Bridgette, and Alexandra, along with their son, Jacob, and dogs, Biscuit and Ella. To learn more about Shon, connect with him on LinkedIn.
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(1) While donor-advised funds have many advantages, some disadvantages to be aware of include but are not limited to possible account minimums, strict limits on grant allocations, management fees, and the potential that future tax laws may change at any time that may impact the tax treatment and benefits of donor-advised funds.