Give yourself the gift of paying less on your 2025 taxes.
Here’s a look at six smart ways to reduce your 2025 taxable income before the clock strikes midnight on Dec. 31, 2025:
1. Contribute to Your Employer Retirement Plan
There is still time to tell your employer to increase your last contribution to your 401(k), 403(b), 457(b) or whichever workplace retirement plan you’ve been using. The maximum contribution limit for these types of employer-sponsored retirement plans for 2025 is $23,500 if you’re under age 50. Those 50-59 (and those 64 and up) can contribute an additional $7,500 in catch-up contributions, and those between ages 60 and 63 can drop in an additional $11,250. And if you contribute to a traditional IRA or Roth IRA, you have until the date that you file your tax return to make contributions for the previous year.
2. Add to Your Health Savings Account
Your health savings account (HSA) is another account where you can make a year-end contribution. In 2025, an individual can contribute up to $4,300 for self-only coverage and $8,550 for family coverage. A catch-up contribution of $1,000 for those age 55 or older gives your HSA a little additional padding. One big head’s up: These maximums include any employer contributions, so make sure that you don’t go over allowable amounts.
3. Give to Charity
You can give to charity text, charge, or snail mail charitable contributions up until December 31. In fact, if you write a check, the IRS uses the date you put the check in the mail as the official contribution date. If you’ve already set up a donor-advised fund (DAF) — here’s the lowdown on this handy giving tool — consider making one last contribution before ringing in the new year. Remember that you can donate more than cash to your DAF. Appreciated stock and real estate are eligible, too.
To learn more about how to unlock the power of your charitable giving, we encourage you to read: Unlock the Power of Giving: Four Strategies for Impactful Philanthropy.
4. Lump and Clump Other Deductions
Lumping and clumping — bunching together a bunch of deductions into a single year to make it easier and more lucrative to itemize — is an effective way to get the most out of your deductions. Try to squeeze in one additional mortgage payment, charitable contribution, or other items you’re allowed to itemize.
5. Employ Tax-Loss Harvesting
While this year has been overall a good year in the stock markets, not every investment has gone up. Review the holdings in your taxable investment accounts to determine if you can take any losses. Realizing losses, or tax loss harvesting, means that you’re selling a security at a loss to offset capital gains of up to $3,000 of ordinary income reported on your tax return.Any losses that remain can be carried forward. Take note that if you really liked the security that you were selling, you need to wait 31 days before buying back that security. Otherwise, not only can you not take that loss, but that loss will be added to the purchase price of the security that you bought back. Confusing? Just wait the 31 days.
6. Contribute to 529 Accounts
If you’re looking for a deduction to your state taxable income, make a contribution to a 529 college savings plan. Check with your specific 529 account’s custodian to find out the last date that they are accepting 2025 contributions. Note that deductible amounts vary by state.
Take some of these steps before year-end and give yourself the gift of paying less at tax time.
Source: HerMoney.com