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As the year winds down, it's the perfect time to take advantage of tax strategies that can reduce what you owe next April. A few proactive steps now could help you avoid wasting money and keep more of your hard-earned income.
Taxpayers may overlook valuable year-end opportunities simply because they aren't aware of the rules or deadlines. By acting before December 31, you can meaningfully strengthen your financial position for the year ahead.
Here are some key year-end tax moves worth considering before the calendar turns.
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Itemize your deductions
While most taxpayers take the standard deduction, itemizing may reduce your taxable income if your eligible expenses exceed the standard deduction thresholds. For tax year 2025, the limits are $15,750 for single filers and $31,500 for married couples. Common deductions include mortgage interest, state and local taxes (SALT), medical expenses, and charitable donations.
Under the One Big Beautiful Bill (OBBB), which was passed in July, the SALT deduction cap rises to $40,000 through 2029 (up from $10,000), creating more room for deductions if you live in a high-tax state. Those age 65 and older may also benefit from an additional $6,000 senior deduction, depending on their income.
Tax-loss harvesting
Selling investments that have declined in value can help you offset gains elsewhere in your portfolio. This technique — known as tax-loss harvesting — allows you to use realized losses to cancel out taxable gains from other assets. If your losses exceed your gains, you can deduct up to $3,000 against ordinary income every year, while any additional losses can roll over to upcoming tax years.
However, it's important to be aware of the wash-sale rule, which says you may not repurchase an identical investment within 30 days either before or after the sale. At present, the wash-sale rule does not apply to cryptocurrencies.
Make a charitable contribution
Charitable giving is another powerful way to reduce taxable income before year-end. For tax year 2025, you can give up to $19,000 per individual, or $38,000 for married couples, without triggering gift tax reporting requirements.
Alternatively, donating appreciated securities instead of cash can help you avoid capital gains tax while still securing a deduction if you itemize. Beginning in 2026, those who don't itemize their deductions will be able to deduct up to $1,000 in cash donations per individual, or $2,000 for joint filers. The top charitable deduction rate will drop from 37% to 35% starting in 2026, so high-income donors may want to act before the end of the year to make any sizable donations.
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Consider a Roth IRA conversion
A Roth IRA conversion allows you to move funds from a traditional IRA into a Roth IRA and pay taxes on those funds today. This strategy can be especially useful if you want to reduce required minimum distributions (RMDs) later in retirement or you expect your income or tax brackets to rise in future years.
Once converted, your future withdrawals — including investment earnings — are tax-free as long as you are at least 59½ and meet the five-year rule. Because the amount you convert counts as taxable income for the year, timing is key to ensuring you don't inadvertently push yourself into a higher tax bracket.
Make additional retirement account contributions
For tax year 2025, workers can contribute up to $23,500 to a 401(k) or 403(b), with an extra $7,500 available for those age 50 and older. If you're aged 60 to 63, the catch-up contribution limit is $11,250.
Increasing contributions before year-end helps you reduce current taxes while strengthening your long-term retirement outlook.
Check your eligibility for any tax credits
Year-end is the ideal time to review whether you qualify for tax credits that could reduce what you may owe when you file your 2025 tax return.
Claiming even one credit could meaningfully boost your refund. Taking a few minutes to confirm eligibility now can help you file confidently and avoid missing valuable savings.
Bottom line
These year-end tax strategies can help reduce your 2025 tax bill while strengthening your financial position for the long term. By reviewing deductions, boosting retirement contributions, and taking advantage of tax-efficient investment strategies, you can enter the new year with greater confidence.
With a bit of advance planning, you can prepare yourself financially and start 2026 with smarter tax habits that support your long-term goals.
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