Year-End Tax Planning: Last-Minute Moves to Reduce Your 2025 Tax Bill

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  • 1. Maximize Your Deductions

    Review your expenses and make sure you’re claiming every eligible deduction. If you itemize, consider prepaying certain costs—like property taxes or medical bills—that you expect early next year. Business owners can also lower taxable income by purchasing necessary equipment or supplies before year-end.

     

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    2. Boost Retirement Contributions

    Contributing to retirement accounts is a smart way to save for the future and reduce your taxable income. Traditional IRA and 401(k) contributions are tax-deductible, and self-employed individuals should explore SEP IRAs or Solo 401(k)s. Be mindful of contribution limits and deadlines.

     

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    3. Make Charitable Donations

    Charitable giving benefits both you and the causes you care about. Donations to qualified organizations must be made by December 31 to count for 2025. Keep receipts or acknowledgment letters for your records.

     

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    4. Harvest Tax Losses

    If you’ve had investment losses, consider selling underperforming assets to offset gains elsewhere in your portfolio. This tax-loss harvesting strategy can reduce your overall tax liability. Consult a financial advisor to avoid wash sale rules.

     

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    5. Review Your Withholdings

    Had a major income change this year? Check your tax withholdings now. Adjusting your W-4 can prevent surprises at tax time. Overpaying means giving the government an interest-free loan, while underpaying could lead to penalties.

     

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    6. Use Your Flexible Spending Account (FSA)

    If you have an FSA, spend any remaining funds on eligible expenses before the deadline. Some plans allow a grace period or limited carryover, but confirm with your employer to avoid forfeiting unused funds.

     

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    7. Defer Income

    If possible, push income into 2026 to reduce your 2025 taxable income. For example, self-employed individuals might delay sending invoices until January. This works best if you expect to be in the same or a lower tax bracket next year.

     

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    Moves You Can Still Make After December 31

    Missed the year-end deadline? Don’t worry—there are still ways to save on your 2025 taxes up until April 15, 2026:

    • • Contribute to an IRA
      You can make contributions to a Traditional or Roth IRA for the 2025 tax year until the filing deadline. Traditional IRA contributions may be deductible, lowering your taxable income.
    • • Fund a Health Savings Account (HSA)
      If you have a high-deductible health plan, you can contribute to an HSA until April 15. Contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free.
    • • Make SEP IRA Contributions (Self-Employed)
      Self-employed individuals can contribute to a SEP IRA up until the filing deadline, including extensions—an excellent way to reduce taxable income.
    • • Claim Eligible Credits
      Credits like the Saver’s Credit for retirement contributions can still be claimed when you file, as long as you made qualifying contributions before the deadline.

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    Final Thoughts

    The clock is ticking—December 31 will be here before you know it. These last-minute strategies, plus the moves you can make through April 15, can help minimize your tax liability and position you for a stronger financial future. Always consult a tax professional to tailor these steps to your unique situation.

     

    ✅ Ready to Take Action?

    Don’t leave money on the table. Let AllTax Accounting become your trusted financial partner. We'll help you maximize deductions, reduce your tax bill, and plan for a successful 2026.

    
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