7 Year-End Money Moves to Cut Your 2025 Tax Bill

One exception: If you turned 73 this year, you have until April 1, 2026, to take your first distribution. Still, many experts advise taking the money out by the end of the year. “Otherwise you’ll have to take two distributions next year, which can push you into a higher tax bracket,” Welch warns. 

If you inherited an IRA from someone other than your spouse, RMDs must be withdrawn from the account in 2025 and future years if the original account owner had already started taking RMDs.

Before 2025, this rule was waived while the IRS was clarifying and finalizing the 10-year withdrawal rules for inherited IRAs, Welch says.

3. Figure out whether you can itemize — and act accordingly

Far fewer taxpayers are able to itemize these days, since the 2017 Tax Cuts and Jobs Act eliminated or capped many deductible expenses while sharply increasing the standard deduction.

For 2025, your deductible expenses would need to exceed this year’s standard deduction — $31,500 for married couples and $15,750 for singles — to make itemizing worthwhile. For taxpayers 65 and older, the standard deduction rises by an additional $1,600 per spouse for married couples and $2,000 for singles.

Note that the new enhanced senior deduction of $6,000 ($12,000 if married filing jointly) may be taken regardless of itemization status, so it is not counted as part of the standard deduction amount you need to exceed.

That’s a high threshold. Among the circumstances that could tilt the equation in favor of itemizing: if you live in a federally declared disaster area and suffered substantial damage to your property that wasn’t covered by insurance during one of this year’s many climate-related catastrophes. Or if you had health problems that resulted in high out-of-pocket medical bills. In these cases, itemizing your taxes might make sense.

Plus, if you have high state and local taxes (SALT), a temporary increase in the maximum amount that you can deduct — $40,000 for single filers and married couples filing jointly, up from $10,000 in 2024 — might tilt the equation in favor of itemizing.

State and local sales or income taxes (whichever is higher), real estate taxes and certain personal property taxes qualify for the SALT deduction. The limit will increase 1 percent each year through 2029, then drop back to $10,000 in 2030.

If you’re close to the itemizing threshold, try to pump up deductible expenses in what’s left of the year, suggests Kevin Martin, manager at the Tax Institute at H&R Block. For example, you might prepay next year’s first-quarter property taxes, be especially generous with charitable donations this holiday giving season, or schedule an eye exam or physical therapy sessions to push your unreimbursed medical bills past 7.5 percent of your adjusted gross income, after which they become deductible.

Not close? Take the opposite approach, shifting as many potentially deductible expenses as possible into 2026 to help meet the threshold for itemizing next year.

4. Minimize taxes on stock market profits

After this year’s run-up in stock prices, you may be facing a big tax bill on investments you sold in taxable accounts. Even if you didn’t cash in any winners in 2025, you could still owe taxes on profitable mutual funds in these accounts because managers are required to pass along any gains they’ve realized to shareholders at least once a year.

Consider selling a losing investment or two to offset gains, suggests Ryan Morrissey, a wealth adviser with Morrissey Wealth Management in North Haven, Connecticut. You can use up to $3,000 in losses a year as a tax deduction, and you can carry over any losses above the annual limit to lower taxes in future years.

 “Even though the market is having its third consecutive positive year, with the S&P roughly up 15 percent, there are some stocks and mutual funds not having a good year,” Morrissey says.

Depending on your income, you might also consider selling a few winners to take advantage of the current zero percent capital gains rate in certain tax brackets. To qualify, you need to have owned the investment at least a year and, if you are married, have taxable income of $97,700 or less ($48,350 for singles) — that’s after subtracting the standard deduction and other adjustments to income, like 401(k) contributions.

 “You can make a fair amount, into the low six figures before adjustments, and still pay no tax on long-term gains,” says Morrissey, host of the podcast Retire With Ryan.

Still want to own these strong-performing stocks? You can simply buy the shares right back; there are no IRS regulations rules stopping you, as there are for buying back losing investments. Bonus: Future gains will be calculated based on the new, higher purchase price, further reducing the tax bite.

5. Shift some pretax savings to a Roth IRA

If you think your tax rate now is likely lower than it will be in the future — which may be the case if you’re winding down your career or in the early years of retirement before RMDs kick in — consider shifting a portion of the money you’ve saved in pretax accounts, like 401(k)s and traditional IRAs, into a Roth IRA. 

 “Given that we’re in a historically low-rate tax environment now, this strategy can make a lot of sense,” says Snyder. Money in a Roth IRA grows tax-free, and you won’t owe taxes on money that you take out of the account in retirement. And, since the withdrawals don’t count as income, you could land in a lower tax bracket.

Your heirs may thank you. Unlike traditional 401(k)s and IRAs, Roth IRAs don’t have RMDs, potentially leaving more money in the account for an inheritance. Spousal beneficiaries aren’t required to make withdrawals either, and when they do tap the account, they won’t owe taxes on the money. (Non-spousal beneficiaries generally have 10 years to empty the account.)

“If you’re looking to create a legacy for, say, your kids, the tax-free benefits of a Roth are a great gift,” says Morrissey.

The catch: You have to complete the Roth conversion by Dec. 31 and pay taxes on the amount you’re withdrawing from your pretax account now. So you need to determine if you can afford a larger tax bill now to save more on taxes later.

6. Grab a state tax break

Want to set aside money to help pay for your child’s or grandchild’s college education and cut your state income taxes at the same time? Thirty-seven states and Washington, D.C., offer a tax break on contributions to a qualified 529 college-savings plan, for amounts ranging from a few hundred dollars to more than $30,000. (Such plans are not deductible on the federal level, however.)

In all but a handful of these states, the contribution deadline to qualify for the credit or deduction is Dec. 31.

Contributing on behalf of a grandchild? Your best bet is to open a separate 529 account rather than gifting money to a parent’s plan. That’s because grandparent-owned 529s are no longer counted in financial aid calculations, so your generosity won’t jeopardize how much assistance Junior is awarded.

7. Embrace the giving spirit

While the 2017 changes in tax law have made it harder to deduct donations to charities, you may still be able to catch a break for contributions to nonprofits. In fact, you might want to make any anticipated 2026 donations this year to increase your chances of being able to claim a deduction. Starting next year, you can claim only deductions that exceed 0.5 percent of your adjusted gross income.

Or, considering the stock market’s rally this year, you might want to donate shares that have sharply appreciated directly to a charity. As long as you’ve owned the investment for at least a year, you’ll avoid paying capital gains taxes. And, depending on how much you give and your other deductible expenses, you may be able to write off the gift.

If you’re 70½ or older, you can transfer funds directly from a retirement plan to a charity of your choice through what’s called a qualified charitable distribution — say, to satisfy an RMD. You won’t get a deduction for the donation, but the amount you transfer will not be counted as income, which can lower your overall tax bill.

Once you’ve finished your tax moves for 2025, spare a few more moments for tax planning for 2026, especially if you’ll be hitting a milestone birthday such as 50, 65 or 73 — when you may qualify for special credits, higher contribution or deduction levels or be subject to new requirements.

“Being proactive tax-wise at the end of the year, looking ahead as well as back, can really pay off in the long run,” Martin says.

Cameron Huddleston contributed to this report.