Year-End Tax Planning Strategies for 2025

As the year winds down, it’s a good time to do some financial housekeeping. Thoughtful planning before December 31 can help you lower taxable income, make the most of charitable contributions, and prepare for potential future tax changes.

Lowering Your Taxable Income

The final weeks of the year can present an opportunity to review your finances and see where small adjustments might save you money. 

Tax-loss harvesting: If you have investments that have lost value, you may be able to use those losses to offset gains realized in 2025, or up to $3,000 of income. You may consider selling securities that no longer fit your long-term plan, have weaker growth potential, or can be swapped for comparable investments that serve a similar role in your portfolio.(1)

Funding tax-advantaged accounts: Contributions to accounts such as a 401(k), 403(b), or HSA may help reduce your taxable income while building retirement or medical savings. Reviewing your contributions now can help ensure you’re maximizing this year’s limits. (1)

Maximizing Your Charitable Donations

If your mailbox is filling up with requests from nonprofit organizations, you’re not alone. Supporting causes you care about is rewarding on its own, but you may also want to consider strategies that can enhance your tax benefit. 

Bunching contributions: Instead of spreading out donations over several years, consider combining multiple years’ worth into one year. This may allow you to itemize deductions instead of taking the standard deduction each year. (1)

Cash contributions: If you are itemizing deductions in 2025, you can generally deduct up to 60% of your AGI for cash gifts to qualifying charities. (1)

Donating appreciated assets: If you are itemizing deductions and donating an asset held for longer than one year, giving it directly to a qualified public charity may allow you to deduct its fair market value and avoid paying capital gains on the sale, subject to a 30% adjusted gross income (AGI) limitation. (1)

Contributing to tax-advantaged accounts: Contributions to accounts such as a 401(k), 403(b), or HSA may potentially lower your taxable income while also helping you build retirement or medical savings. Reviewing your contributions now can help ensure you’re maximizing this year’s limits. (1)

Consider a Roth Conversion

A Roth conversion involves transferring money from a traditional, or pre-tax IRA to a Roth IRA. You will then be paying taxes on the pre-tax, deductible portion of the converted funds, but future growth can be withdrawn tax- and penalty-free if the account meets the five-year rule and you are at least 59 1⁄2 (or another exception applies, such as disability or death). (2)

Roth IRAs are not subject to required minimum distributions (RMDs) during the original owner’s lifetime. However, inherited Roths have different distribution rules, so consider consulting a tax professional. With tax rates currently scheduled to rise in 2026, waiting to convert could potentially result in higher tax costs later. (2)

Planning Ahead to Reduce Future Taxes

Year-end planning isn’t only about this year’s tax bill, it’s also about positioning yourself for the future. 

Lifetime estate and gift tax exemption increase: This year’s inflation adjustment for the lifetime estate and gift tax exemption was $690,000. For couples, that’s up to $1.38 million in additional gifting capacity for those who had previously maxed out. While this doesn’t need to be used immediately, it’s worth factoring into long-term estate planning. (1)

Annual exclusion gifts: You may give up to $19,000 per recipient in 2025 to as many individuals as you choose, which can help reduce your estate's value without using any of your lifetime gift and estate tax exemption. (1)

Qualified charitable distributions (QCDs): If you’re 70 1⁄2 or older and have an IRA, you may consider making direct transfers of up to $105,000 (or $210,000 for married couples filing jointly) directly from your IRA to qualified charities. This strategy may help satisfy current or future required minimum distributions without raising your AGI, which can also help keep Medicare premiums and Social Security benefits in check. (1)

Article Sources:

(1) Peterson, David. “Year-end tax-planning tips for 2025.” July 25, 2025. https://www.fidelity.com/learning-center/wealth-management-insights/year-end-tax-tips. Accessed September 23, 2025. 

(2) Fidelity Viewpoints, “Key tax moves for 2025.” Fidelity. February 24, 2025. https://www.fidelity.com/learning-center/personal-finance/tax-moves. Accessed September 23, 2025.