Maximizing Strategic Year-End Tax Planning
Get a Jump-Start on Year-End Planning
As the year draws to a close, taxpayers have an important opportunity to review their financial situation and make strategic moves that can reduce their 2025 tax liability. Thoughtful year-end planning helps ensure that deductions are maximized, penalties are avoided, and long-term financial goals stay on track.
State and Local Tax (SALT) Deduction Increases
One of the most significant changes for 2025 is the increase in the state and local tax (SALT) deduction limit, which will rise from $10,000 to $40,000.
This expanded cap means more taxpayers may benefit from paying state estimated taxes before year-end, as they are now more likely to receive the deduction. Those who itemize should evaluate the timing of payments to ensure the best possible tax outcome.
Estimated Payments and Withholding Adjustments
If your income has increased in 2025, it’s important to confirm that your estimated tax payments or withholdings align with your expected liability. Taxpayers who haven’t made “safe harbor” payments, typically 110% of the prior year’s tax liability, may need to increase their fourth-quarter payments.
An alternative strategy is to adjust year-end withholdings on W-2 wages or retirement distributions. Unlike estimated payments, withholdings are treated as paid evenly throughout the year, even if made in December, helping reduce or eliminate underpayment penalties.
Maximize Retirement Contributions
Year-end is also a key time to review retirement plan deferrals. For 2025, the contribution limit for 401(k) and 403(b) plans is $23,500, with an additional $7,500 allowed for individuals aged 50 and older. Those aged 60 to 63 can contribute an extra $3,750.
Taxpayers not covered by employer plans may consider contributing to a traditional or Roth IRA. Traditional IRA contributions may be deductible depending on income, while Roth IRAs offer tax-free growth and withdrawals in retirement. For those in lower-income years, a Roth conversion may also be worth evaluating.
Charitable Giving and Loss Harvesting
With the higher SALT deduction limit, charitable contributions are more likely to provide a tax benefit. Taxpayers who itemize can more easily exceed the standard deduction, making year-end gifts to qualified charities tax-efficient.
Those already taking required minimum distributions (RMDs) can also consider a Qualified Charitable Distribution (QCD), which allows a direct transfer from an IRA to a charity. Because the income never enters adjusted gross income, this strategy can reduce overall tax exposure and help meet philanthropic goals efficiently.
Required Minimum Distributions and Inherited IRAs
Taxpayers turning 73 in 2025 must begin taking RMDs from retirement accounts. Missing a required withdrawal can result in steep penalties. While the first RMD can be delayed until April 1, 2026, doing so would require taking two distributions that year, potentially increasing taxable income.
Additionally, individuals who inherit an IRA in 2025 should confirm the rules that apply to their situation. Recent changes have made distribution requirements more complex, and understanding the applicable timelines is essential for avoiding penalties.
Family Gifting Opportunities
Before year-end, consider taking advantage of the annual gift exclusion, which allows individuals to give up to $19,000 per recipient (or $38,000 for married couples) without triggering gift or estate tax implications. These gifts are not taxable to the recipient and do not require a gift tax return, making them a simple and effective way to transfer wealth.
Personalized Strategies for Planning
Strategic year-end planning isn’t just about closing out this year; it’s about setting the stage for success in the next. Reviewing your financial goals, assessing opportunities for savings, and planning proactively can position you to start the new year with confidence. Contact our team to discuss personalized strategies that can help you make the most of your year-end planning.
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Tax planning can be complex, but Hantzmon Wiebel is here to help. From reporting requirements to cross-border compliance, our team provides the guidance you need to navigate global tax obligations with confidence. Learn more at https://www.hwllp.cpa/tax
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Disclaimer of Liability
Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.
