Year-End 2025 Tax Planning: A Practical Guide for Individuals

If you only do deep tax housekeeping once a year, make it now. With new 2025 rules, several “sunsets” that were expected for 2026 were reshaped by the One Big Beautiful Bill Act (OBBBA), and inflation-indexed thresholds, smart moves before December 31 can meaningfully lower what you owe next spring and set you up for 2026.

Below is a plain-English playbook you can use (and share with family and friends). It focuses on actions you can still take before December 31, 2025.

1. Max Out (or at Least “Top Off”) Tax-Favored Savings

Workplace plans (401(k)/403(b)/457). For 2025, the employee deferral limit is $23,500. If you’re 50+, you can add a catch-up of $7,500. If you’re age 60–63 at any time in 2025, there’s a special catch-up of $11,250 (instead of $7,500)—confirm that your plan supports it. Ask HR or your recordkeeper how much you’ve contributed year-to-date and adjust your final paychecks if needed.

IRAs. The 2025 IRA limit is $7,000 (plus $1,000 catch-up if age 50+). Deductibility (traditional) and eligibility (Roth) depend on income and workplace coverage, so check the phase-outs. If you’re eligible for both a workplace plan and an IRA, you can do both, just mind the phase-outs.

HSAs (if you’re in an HSA-eligible high-deductible plan). 2025 maximums are $8,550 family / $4,300 self-only (+ $1,000 catch-up if 55+). Unlike FSAs, HSA contributions can be made up to the tax filing deadline, but getting dollars in before year-end starts tax-free compounding sooner.

Health FSAs. If your employer allows it, you can contribute up to $3,300 for 2025. Use any 2025 “use-it-or-lose-it” balance by your plan’s deadline (some plans have grace periods or a carryover).

2. Update Your Withholding and Estimated Tax for the New 2025 Rules

Two 2025 changes matter for many households:

• The standard deduction increased (relative to 2024) and
• The SALT (State and Local Tax Deductibility) cap was expanded (more on that next).

If you’ve had raises, bonuses, stock sales, or big deductions, revisit your Form W-4 or make a fourth-quarter estimated payment to avoid penalties. The IRS has a 2025 withholding explainer and estimator to help you right-size now instead of in April. F+H is also available to assist.

3. SALT Deduction is More Generous—For Many, But Not All

For 2025, OBBBA increased the itemized deduction cap for state and local taxes (SALT) to $40,000 (single and joint filers each get the same cap).

High earners: the benefit phases down once modified AGI exceeds $500,000 (MFS threshold is $250,000).

Planning angle: If you itemize and are under the phase-down threshold, paying the fourth-quarter state estimate or property taxes in 2025 could be deductible (subject to the cap). If you expect to be over the threshold, the extra SALT deduction may be reduced; coordinate timing with your financial advisor.

4. Make Charitable Gifts the Tax-Efficient Way

Bunch or front-load gifts into 2025 if your itemized deductions will crest above the higher standard deduction. Consider appreciated securities held for greater than 1 year to avoid capital gains and still deduct fair market value (AGI limits apply). Donor-advised funds simplify multi-year giving.

Age 70½+: Consider Qualified Charitable Distributions (QCDs) from IRAs—these can satisfy Required Minimum Distributions and keep the withdrawal out of AGI. The QCD cap is $108,000 per person in 2025. Coordinate with the custodian so that checks go directly to the charity.

2026 and Beyond: New 0.5% AGI Floor 

The new 0.5% AGI floor introduced by the OBBBA means that starting in 2026, only the amount of your charitable contributions that exceeds 0.5% of your AGI will be eligible for a deduction.

For example, if your AGI is $200,000 in 2026, the first $1,000 of your charitable donations ($200,000 * 0.5%) will not be deductible.

Due to this change, if you have charitable intentions in the next few years, consider accelerating those donations into 2025 to maximize their deductions under the current, more favorable rules.

5. Harvest Gains and Losses—Without “Wash Sales”

Review taxable accounts now:

• Loss harvesting lets you offset realized gains plus $3,000 of ordinary income (remainder carries forward).
• Gain harvesting can make sense if you’re in or near the 0% long-term capital gains bracket (thresholds adjust annually). Mind NIIT (3.8%) exposure if your modified AGI exceeds the fixed NIIT thresholds and coordinate with Roth conversions and bonus income. Coordinate this with your F+H tax professional to determine if this is an option.

Remember: replacing a sold holding at a loss with substantially identical security within 30 days creates a wash sale (loss disallowed). Use a similar, although not identical, equity, ETF, or mutual fund if you like the position.

6. Roth Conversions While Rates Are Still Known

Converting a slice of pre-tax IRA/401(k) money to Roth before year-end can “fill up” lower tax brackets and hedge against higher future rates. Model the interaction with NIIT, Social Security taxation, and Medicare IRMAA—even small conversions can trip surcharges. If you had a down-market year in any holding, consider an in-kind conversion to lock in recovery inside the Roth. We can assist with this decision.

7. Education Moves: 529 → Roth and American Opportunity/Lifetime Learning Credits

SECURE 2.0 allows rolling up to $35,000 lifetime of unused 529 funds to a Roth IRA for the beneficiary, subject to annual IRA limits and earned-income requirements, and the 529 must be 15+ years old. If a child worked in 2025, a year-end rollover might be available. Additional restrictions apply, so check with us first.

8. RMDs and IRA Housekeeping

RMD age is 73, and if 2025 is your first RMD year, you can delay the first one until April 1, 2026, but then you’ll owe tax on two RMDs in 2026. Many retirees choose to split the income by taking the first in 2025. Confirm RMDs across all applicable accounts; Roth IRAs have no lifetime RMD.

9. “Above-the-Line” and Other Smart, Often-Missed Moves

• HSA last-month rule: If you’re HSA-eligible on December 1, you might qualify for a full-year contribution, but beware the 12-month testing period.
• Energy-efficient home upgrades (credits vary; verify vendor documentation).
• Dependent care: run the math on Dependent Care Flexible Spending Account compared to the Child and Dependent Care Credit for 2025. Generally, the DCFSA offers greater savings for higher-income households, while the CDCC is more beneficial for lower- to middle-income families.
• Identity protection PIN: enroll before filing season to add a security layer with the IRS. You can do this by creating an online account with the IRS here: Online account for individuals | Internal Revenue Service.

10. Estate & Gift Planning—2025 Numbers and 2026 Backdrop

• Annual exclusion gifts: $19,000 to each recipient for 2025 is an easy way to move wealth without using the lifetime exemption.
• Estate and gift lifetime exemption: $13.99 million per person in 2025; increasing to $15 million in 2026. If you’ve been waiting, revisit your 2025 gifting window with us.

11. Side-Income & Marketplace Payments: Know Your Forms

If you sell online or get paid through platforms, note that the Form 1099-K threshold has been raised to $20,000 and 200 transactions (retroactive per OBBBA). Previously, it was $2,500 for 2025. That doesn’t change what’s taxable, only who sends a form, so track your income either way.

This article is general information. Coordinate moves with your F+H  advisor, especially where phase-outs, NIIT, AMT, Medicare IRMAA, or state tax rules could change the math.