OvernightWe’re nearing year’s end, which means your head is on a swivel, darting from online shopping to holiday parties to wrapping presents to Christmas plays & concerts, then back to shopping, but this time, in-person. The last thing on your mind is what you’ll soon complain about – TAXES...
But, now that you've mentioned TAXES, it’s my duty to remind you that there’s still time to cut your most significant expense – TAXES!
To help you achieve this goal, here are a few tried-and-true tax-cut tips:
Personal Tax-Cut Tips:
- Maximize Retirement Contributions
- Max HSA Contributions
- Harvest Investment Losses
- Itemizing? Charities are Back!
- Section 529 Contributions
Personal Tax-Cut Tips
Nearly all tax-cut strategies require spending money in one way or another. The challenge is ensuring that spending is an investment, not wasting $1,000 to save $300 in taxes. One of the surest ways to reduce the waste-risk while reducing your taxable income dollar-for-dollar is to invest in your future by saving for retirement. Simply moving funds from your checking account to retirement can save hundreds of dollars per thousand. Plus, the savings grow tax-free until you retire!
If you have a retirement plan through your employer, contact HR or Payroll and make a lump-sum contribution before the end of the year. Also, be sure to ask about any employer matches and maximize them. It’s free – and tax-free - money!
No employment-based retirement? If you have earned income and need a tax cut, consider contributing to a Traditional IRA. For 2025, you can deduct up to $7,000 if you’re under fifty years old, and $8,000 if you’re over fifty. Best of all, you have until April 15th of the following year to make your contribution. Seek assistance, however, if you or your spouse is offered retirement through work, as income limits may apply.
Self-Employed? Looks into a Simplified Employer Pension (SEP IRA) or a SOLO 401(k). Each plan allows significant contributions (potentially exceeding $60,000 in tax deductions) based on business income. The SEP also allows contributions up until the due date of your tax return, including extensions. The SOLO 401(k) is a bit more complex but offers some benefits the SEP lacks. Be careful if you have employees. The SEP has employee participation rules, and a SOLO 401(k) is generally not permitted for business owners with employees other than a spouse and young children (under 21).
Health Savings Accounts, tax-deferred investment plans tied to high-deductible health insurance, are becoming increasingly popular as health care costs rise. Financially savvy individuals understand the long-term benefits of HSAs and maximize their annual contributions. Unfortunately, most of us, particularly those who have HSAs through work, do not realize their value.
What makes HSAs so special? The short of it is that an HSA acts as a retirement account that pays qualified medical expenses with tax-free dollars. After age 65, HSAs can even be used to pay insurance premiums.
Employer contributions are generally free, and employee contributions through payroll are pretax. Those made directly by the insured are deductible from AGI and (typically) not subject to state tax either. For 2025, $4,300 for self-only coverage and $8,550 for family coverage. For 2026: $4,400 for self-only and $8,750 for family. Limits are adjusted for inflation, so if you’re reading this in a later year, they’re likely higher.
Here’s one of the few tax-cut strategies that doesn’t require spending money. If you have investment dogs (sorry, canine lovers, that’s what they’re called) or own some long-term investments that have taken a temporary plunge and entered loss territory, consider selling them by year’s end. The losses will offset any gains from other investments, and you’re allowed to deduct up to $3,000 extra from ordinary income! Best of all, wait 30 days, and you can repurchase the stocks you love and lock in a new basis (the investment used to calculate gains & losses). But don’t repurchase before thirty days – that’s called a wash sale, and you’ll lose the loss.
Itemizing? Charities Are Back, Baby!
(following a quick itemized deduction review)
Itemized deductions are a confusing topic for many filers, so here’s a quick overview. Taxpayers may deduct a standard amount from their income before calculating Taxable Income, called the Standard Deduction, or elect to Itemize Deductions.
Itemized deduction includes the total of medical expenses (that exceed 7.5% of AGI), state and local taxes (up to a limit), interest paid on primary and secondary residential mortgages (up to a limit), Charitable Contributions, and a few – very few - miscellaneous items.
Even though you’re allowed to take one or the other, the goal is to minimize taxable income by deducting the greater of the standard deduction or itemizing. In recent years, most filers have taken the standard deduction due to a massive 2018 increase that nearly doubled it (due to the Tax Cuts and Jobs Act). It is also adjusted for inflation. For 2025, the standard deduction will be $15,700 for single filers, $31,500 for those Married Filing Jointly, and $23,650 for those claiming Head of Household.
In 2025, More Filers will itemize: From 2017 to 2024, the itemized deduction for State and Local Taxes (income, personal, and real estate) was capped at $10,000 per year. The Big Beautiful Bill of 2025, however, increased this cap to $40,000. The result? More clients and readers will benefit from dumping the standard deduction and itemizing. Note: the new $6,000 senior bump has been applied to those taking the standard deduction and itemizers.
Incentive to Donate: If you itemize deductions for 2025, charitable donations have returned to your tax-cut handbook. Make donations to a qualified charity (most common and churches and 501(c)(3) organizations) by year’s end to receive the deduction. Remember to get a receipt and year-end statement and to write a check or use a debit/credit card as a backup. Sorry, most GoFundMe fundraisers or similar donations that benefit a specific individual do not qualify.
Additionally, if you’re on the itemizing bubble, consider bunching charitable donations. Saving your donation dollars one year to double up on them the following year may carry you over the hump and cut taxes by putting you over the deduction hump.
Finally, own some appreciated stock? If you’ve held it for more than one year, consider donating it directly to your favorite charity rather than selling it and donating the proceeds. You can take a charitable deduction for the stock’s full value and avoid paying capital gains taxes on it! As with any tax strategy, complications abound, so if you’re in a position to use this strategy, consult a professional before proceeding.
State Deduction -- 529 Plan Contributions:
Section 529 Savings Accounts allow parents to save for their child’s education. Earnings in these accounts grow tax-free, and most states allow a tax deduction from taxable income. Sorry, CA, DE, HI, KY & NC residents, no deduction for you. Other states, IN, OR, UT, VT, offer a tax credit rather than a deduction. WV is one of only four states (along with CO, MN & SC) that allow a full deduction with no annual contribution limit.
The Big Beautiful Bill made significant changes that will enable 529 plans to pay for vocational training and certifications, such as commercial driving, plumbing, and electrical work. Preparation and exam fees for professional licenses, such as the CPA & bar exams, also qualify.
An excellent tool for private and homeschoolers: The BBB also increased the flexibility families have for using 529 funds for K-12 education. It doubled the allowable distributions to $20,000 (from $10,000) and increased flexibility when using funds for materials, tutoring, and educational mentoring services.
ROTH Rollover: A final benefit for starting a 529 plan when your children are young is the ability to roll unused proceeds into the child’s ROTH. The Secure Act 2.0 allowed such rollovers to occur starting in 2024. To qualify, the ROTH must be open for the same beneficiary for at least 15 years, and only funds in the account that have been held for at least 5 years are eligible. The rollover is treated as a contribution subject to the annual ROTH limit (without any income tests). There is also an overall rollover cap of $35,000.
Are you a business owner? See our Year-End Tax Planning Tips for Business Owners →
All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.