Year-End Tax Planning Strategies and Checklist for 2025

Written By Thomas Cooper

As 2025 comes to an end, now is the time to take a closer look at your finances and make strategic moves that can reduce your tax bill before December 31. Year-end tax planning allows individuals and small business owners to take advantage of available deductions, manage taxable income, and position themselves for a stronger start to the new year.

Here are key strategies and a practical checklist to help guide your year-end tax review.

1. Maximize Retirement Contributions

Contributing to tax-advantaged retirement accounts is one of the most effective ways to reduce taxable income.

  • 401(k) or 403(b): The 2025 contribution limit is $23,500 (plus $7,500 catch-up for those age 50+).

  • Traditional or Roth IRA: Up to $7,000 ($8,000 if 50+) can be contributed for 2025.

  • SEP IRA or Solo 401(k): Self-employed individuals and small business owners can often contribute significantly more, based on net earnings.

Tip: If you have both W-2 income and self-employment income, coordinate contributions across all plans to stay within annual limits.

2. Review Charitable Giving

Donations made by December 31 can still count toward your 2025 deduction if you itemize.

  • Consider donor-advised funds (DAFs) to maximize deductions while giving flexibility in how you distribute funds over time.

  • If you’re age 73 or older, qualified charitable distributions (QCDs) from IRAs can satisfy required minimum distributions (RMDs) while avoiding taxable income.

3. Manage Investment Gains and Losses

Before the year closes, review your investment portfolio to determine whether tax-loss harvesting makes sense. Selling investments at a loss can offset capital gains and up to $3,000 of ordinary income.

Caution: The wash-sale rule prevents deducting a loss if you repurchase the same or a substantially identical security within 30 days.

4. Check Withholding and Estimated Payments

Avoid surprises at tax time by reviewing your federal withholding and estimated tax payments.

  • Use recent pay stubs and year-to-date income summaries to verify accuracy.

  • Business owners should ensure quarterly estimated payments align with 2025 income levels to prevent underpayment penalties.

5. Plan for Required Minimum Distributions (RMDs)

If you’re age 73 or older, confirm that your RMDs are completed by December 31 to avoid a penalty on the amount not withdrawn.

  • RMDs apply to traditional IRAs and most employer retirement plans.

  • A qualified charitable distribution may help satisfy the requirement while reducing taxable income.

6. Consider a Roth Conversion

If you expect to be in a higher tax bracket in the future, a partial Roth conversion can be a smart move. Converting pre-tax retirement funds to a Roth IRA now can lock in today’s lower rates and provide tax-free growth later.

7. Review Small Business Deductions and Entity Planning

For business owners, year-end is a key time to strengthen your tax position:

  • Purchase needed equipment or technology before December 31 to benefit from Section 179 or bonus depreciation rules.

  • Reconcile your books and make sure all deductible expenses are captured.

  • Review your entity structure (LLC, S-Corp, etc.) to confirm it’s still the most tax-efficient for 2026 and beyond.

8. Use Flexible Spending Accounts (FSAs) Before They Expire

If you have an FSA through your employer, confirm your plan’s rules—many require funds to be used by December 31. Some allow limited carryover or grace periods, but unspent amounts may be forfeited.

9. Gather Key Tax Documents Early

Preparing now helps ensure a smooth filing season.

  • Collect W-2s, 1099s, brokerage statements, and other tax forms as they become available.

  • Summarize charitable contributions and deductible expenses.

  • Keep digital copies of major receipts and invoices for your records.

Your 2025 Year-End Tax Planning Checklist

Use this quick reference list to confirm you’ve covered the essentials before year-end:

  • Maxed out retirement contributions

  • Reviewed charitable giving opportunities

  • Evaluated investment gains and losses

  • Checked withholding and estimated tax payments

  • Taken RMDs (if applicable)

  • Considered a Roth conversion

  • Completed business purchases and bookkeeping

  • Used FSA funds before expiration

  • Organized tax records and documents

Year-end tax planning is most effective when done proactively. Whether you’re an individual taxpayer, self-employed professional, or small business owner, thoughtful preparation now can make a measurable difference on your 2025 tax return.

Thomas Cooper
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