Year-End Tax Planning: What to Do Before December 31 to Reduce Your 2025 Bill

The last few months of the year are more than holidays and celebrations—they’re also a closing window of opportunity to lock in real tax savings. Once December 31 passes, many strategies vanish until the following tax year, making urgency a key part of smart planning. With smart planning before December 31, you can reduce what you owe on your 2025 return and step into the new year with confidence. Whether you’re filing as an individual or running a small business, year-end is when strategy matters most.

Maximize Retirement Contributions

Contributing to retirement accounts remains one of the most effective ways to lower taxable income. Traditional IRAs and 401(k)s allow individuals to deduct contributions, while business owners can take advantage of SEP IRAs or Solo 401(k)s with higher limits.

Practical Tip: Even a partial contribution makes a difference. Review your accounts now to make sure you’re on track and capture any employer match before year-end.

Beyond just reducing taxes, retirement contributions also build long-term financial stability. If you’re self-employed, reviewing your options with a tax advisor can ensure you’re taking advantage of higher contribution limits available to business owners.

Example: A self-employed graphic designer who puts $10,000 into a SEP IRA before year-end can potentially reduce taxable income by the full amount, while also building future retirement security.

Use Charitable Giving to Your Advantage

Donations made by December 31 may qualify as deductions. This can include cash gifts, donated stock, or contributions through donor-advised funds. Even if you don’t itemize, qualified charitable distributions (QCDs) from retirement accounts can be a tax-efficient way to give.

Practical Tip: Keep proper documentation for all donations. The IRS requires receipts for contributions, even smaller ones.

If you’re considering a larger gift, donating appreciated stock instead of cash may give you a double benefit—avoiding capital gains tax while still claiming a deduction. For high-net-worth individuals, year-end charitable strategies can make a meaningful difference.

Example: A couple donates shares of stock purchased years ago. By giving directly instead of selling, they avoid capital gains tax and still deduct the fair market value of the stock.

Be Strategic with Income and Expenses

Timing matters. Deferring income, like year-end bonuses, into January can lower this year’s taxable income. Small businesses can prepay certain expenses—such as rent, supplies, or insurance—before December 31 to reduce current profits.

Practical Tip: Business owners may benefit from Section 179 expensing, which allows full deductions on qualified equipment purchases in the year they’re made.

This is also a good time for individuals with freelance or contract income to consider whether to accelerate certain expenses, like purchasing equipment or software now rather than next year. Adjusting cash flow in these ways can significantly shift your year-end tax position.

Example: A freelance photographer who buys new camera equipment in December instead of January may qualify for an immediate deduction, reducing this year’s tax bill while improving their business operations.

Don’t Miss Small Business Write-Offs

For small businesses, year-end is the perfect time to review deductions. Consider: - Buying equipment or software you’ll need next year - Logging vehicle and mileage expenses accurately - Ensuring payroll and contractor payments are recorded - Making estimated tax payments on time to avoid penalties

Practical Tip: Organized records now mean fewer errors and less stress at tax time.

Additionally, reviewing employee benefits before year-end can help you identify further deductions. Employer contributions to retirement plans, year-end bonuses, and even wellness programs may qualify as deductible business expenses.

Look at Investment Strategies

Selling underperforming investments before year-end, known as tax-loss harvesting, can offset capital gains and reduce taxable income.

Practical Tip: Avoid the wash-sale rule—buying a substantially identical investment within 30 days cancels the deduction.

If you’ve had a strong investment year, working with a financial advisor and tax professional can help you coordinate gains, losses, and charitable giving for maximum impact. Even modest adjustments in December can translate into significant savings.

Also, keep in mind capital gains tax brackets. If your income is lower this year, you may qualify for the 0% long-term capital gains rate, making it a strategic time to realize certain gains.

Review Health and Education Accounts

Don’t forget about contributions to accounts beyond retirement. Health Savings Accounts (HSAs) and 529 college savings plans can provide tax benefits and help with long-term planning.

Practical Tip: HSAs allow you to contribute pre-tax dollars, use them tax-free for qualified medical expenses, and enjoy tax-deferred growth. That’s a triple advantage worth considering before year-end.

529 contributions may also offer state tax deductions, depending on where you live, while building future education savings.

Example: A parent who contributes $5,000 to a 529 plan in December not only grows an education fund for their child but may also qualify for a state tax deduction.

Stay Ahead with Bookkeeping

Clean books make for smoother filings. Individuals should review receipts and expense logs now, while businesses should reconcile accounts, prepare 1099s for contractors, and ensure payroll records are complete.

Practical Tip: Doing this in October or November allows you time to catch missing items rather than scrambling in April.

Watch for 2026 Tax Changes

Many provisions from the Tax Cuts and Jobs Act (TCJA) are set to expire after 2025. High-net-worth individuals and business owners should start reviewing potential impacts now—particularly changes to personal deductions, estate tax exemptions, and business tax treatment. Planning ahead may allow you to take advantage of current rules while they last.

Finish the Year Strong

Smart planning now can create meaningful savings later. Acting before December 31 ensures you don’t leave money on the table. For individuals and businesses alike, year-end moves can change the story of your 2025 tax bill.

Gregg Jaffe Tax Services provides personalized strategies for clients across New York, helping you plan ahead and file with confidence. Individuals seeking help with their returns can also explore our Personal Tax Preparation services.

Phone: 516-770-5305

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Frequently Asked Questions

What are the easiest ways to lower taxes before year-end?

Retirement contributions, charitable donations, health savings account contributions, and adjusting the timing of income or expenses are the simplest and most effective moves.

Can small businesses reduce taxes with year-end purchases?

Yes. Prepaying expenses or investing in equipment before December 31 can lower taxable income if recorded properly. Employers may also benefit from reviewing benefit programs and retirement plan contributions.

When is the best time to meet with a tax advisor for planning?

By October or November. That window gives you time to act on strategies that can still affect your current year’s tax bill.