2025 Year-End Tax Planning Reminders
Year-end is when small moves can still lower next April’s bill. This is intended to highlight actions you can take before December 31 that impact your taxes. As this is a general overview for educational purposes, we recommend you consult your professional advisors before implementing any strategy to ensure alignment with your personal circumstances and overall financial plan.
Employer-Sponsored Retirement Plan Contributions
Check to see if you are on pace to maximize your retirement contributions for the year. If not, consider adjusting your contributions (if your plan allows) to your employer-sponsored plan (i.e., 401(k), 403(b), or TSP). The maximum deferral for 2025 is $23,500 for individuals or $31,000 for those aged 50 and above. Deferrals must be elected and withheld from pay by December 31, 2025. Check with your payroll department to confirm the deadlines applicable to your plan.
IRA Contributions
The 2025 contribution limit for Individual Retirement Accounts (IRAs) is $7,000 or $8,000 for those age 50 or older. IRA account holders can deduct contributions until the April 15 tax filing deadline (but not beyond that regardless of extensions).
Health Savings Accounts (HSAs)
If you are covered by a high deductible health plan, make sure you maximized deductible contributions to a health savings account (HAS). These accounts are available to participants enrolled in a high-deductible health insurance plan. The maximum contribution in 2025 is $4,300 for a single person and $8,550 for a family. Note that this limit includes any employer contributions made to the plan on your behalf.
Education Planning
If applicable, maximize deductible contributions to 529 plans. Each state sponsors its own 529 plan and has different tax incentives and rules, so it is important to review plan-specific details to determine deductibility. The IRS views 529 contributions as gifts. In 2025, individuals can gift up to $19,000 per beneficiary without counting against their federal lifetime exclusion.
Required Minimum Distributions (RMDs)
The IRS requires that RMDs generally begin at age 73. Your 2025 RMD is due by December 31, 2025 (first-timers can delay the first RMD to April 1, 2026, but that means taking two RMDs in 2026). If you miss an RMD, the IRS excise tax is 25% of the shortfall, 10% if corrected within two years. Don’t wait to process your distribution, as custodians often have late November or early-December cutoffs.
Qualified Charitable Distribution (QCD)
A QCD (also known as a charitable IRA distribution) allows individuals aged 70 ½ or older to donate up to $108,000 in 2025 (indexed) to one or more charities directly from a taxable IRA instead of taking their RMD. Since RMDs are considered ordinary income subject to tax, donating the funds to a qualified charity may prevent donors from being pushed into higher income tax brackets and phasing out other tax deductions. The funds must leave your IRA by December 31, so make sure you leave time for processing to avoid missing the deadline. There are specific rules for QCDs and reporting requirements to the IRS, so it is recommended that you consult with your tax professional to ensure compliance. QCDs don’t produce a charitable deduction; their benefit comes from keeping the distribution out of your taxable income, which may also help preserve other deductions and credits.
Roth Conversions
Once you have a sense of your taxable income for the year, explore whether a Roth conversion makes sense. When you convert pre-tax IRA funds to a Roth IRA, you’ll owe taxes on the conversion amount, but all future gains and qualified withdrawals will be tax-free. While the deadline to complete a Roth conversion for 2025 is December 31, many custodians require the request to be submitted by late November to early December. It is highly recommended not to wait until the last minute to request a Roth conversion to ensure it is completed before year-end to prevent processing delays.
2025 Important Numbers
Given the number of things to keep in mind, we have included a guide that summarizes the 2025 IRS limits and important thresholds as a reference.
Reminders
Year-end tax planning is about making intentional moves before deadlines pass. Whether it’s maximizing retirement contributions, managing RMDs, or evaluating strategies like Roth conversions and charitable giving, proactive steps now can potentially reduce your tax bill. The rules are complex and the numbers change each year, so consult your financial and tax professionals to make sure any strategy you implement fits your personal situation.
This information is educational in nature and not intended as specific tax or investment advice.
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