2025 year-end tax planning tips and items to consider

I have to admit, most of the things I’m about to share are just recycled from a prior year’s blog post. But that’s because most of these items are always things to consider as part of each year’s year-end tax planning and are therefore “evergreen” topics. It’s not just me being lazy and not wanting to write this whole thing from scratch, I swear!

However, there are also some new things to bring up for 2025, thanks to this year’s passage of the One Big Beautiful Bill Act that put in place some meaningful tax code changes, some starting with the 2025 tax year.

Without further ado, here are some tax planning tips and things to consider as we enter the final couple of months of the year:

Contributions to qualified plans – If you’re eligible to make contributions to qualified retirement plans such as IRAs, Roth IRAs, 401(k)s, 403(b)s, 457s or the federal Thrift Savings Plan (“TSP”), or if you are eligible to contribute to a Health Savings Account (“HSA”), now would be a good time to check to see if you’ve made (or will make) all of the contributions you planned for the year.

The deadline to make 2025 contributions to IRAs, Roth IRAs and HSAs is April 15, 2026. Specifically, you have until you file your tax return (assuming you file your return on time), plus extensions, to make a contribution for the 2025 tax year.

The deadline to make contributions to the various employer-sponsored retirement plans (i.e. 401(k)s, 403(b), 457 or the TSP) is December 31, 2025. While the technical deadline is December 31, the practical deadline is whenever your last paycheck is for the year, as contributions need to be made via payroll deductions.

Roth conversions – if doing Roth conversions is part of your 2025 tax plan, be sure to get the conversion(s) done by close of business December 31st (but don’t cut it too close, as I’ll mention at the end of this article).

Unlike making contributions to Roth IRAs, where you can contribute up until filing your tax return next year, making a conversion to a Roth IRA needs to happen before the end of this calendar year.

Qualified plan distributions – if you plan on doing 2025 distributions from any of your qualified retirement plans (e.g. IRA, 401(k), etc.), be sure to do them prior to end of December 31st so they count for this year.

Like with doing 2025 Roth conversions, if you want a distribution from a qualified plan to count for 2025, you have to actually do it in 2025. It’s not like making contributions to some plans such as IRAs and Roth IRAs where you can make a 2025 contribution up until you file your 2025 tax return in 2026.

Required Minimum Distributions (“RMDs”) – similar to the point above about qualified plan distributions, if you are required to take RMDs from a qualified plan, be sure to take it prior to the end of December 31st, as that’s the deadline for the RMD to count for the year.

RMDs may apply on your own qualified retirement plans, or on qualified plans you inherited from someone else. There are penalties for not taking RMDs when you were supposed to, so be sure to get them in before the end of the year.

And another thing to keep in mind specifically with RMDs from inherited accounts, there is no longer a waiver of RMDs for certain inherited accounts like there was in prior years; you must take 2025’s RMD in 2025 or face penalties.

The specific types of inherited accounts (where RMDs were essentially waived for a few years) I’m referencing are inherited pre-tax accounts where the original account owner 1) died after 2019, 2) was of an age where they were required to start their own RMDs and 3) left the account to someone who is a “noneligible designated beneficiary.”

A noneligible designated beneficiary is a person who is NOT:

the original owner’s spouse
a child under the age of majority
not more than 10 years younger than the original owner (sorry, I did a double negative here; NOT not more than 10 years younger... To phrase it more cleanly, if the beneficiary IS more than 10 years younger than the original account owner AND doesn't otherwise meet any of these other four bullets, they are a noneligible designated beneficiary)
permanently disabled
chronically ill

A noneligible designated beneficiary has to fully distribute the inherited account by the end of the 10th year after the year of the original owner’s death. However, in the case where the original owner was of their own RMD age, the beneficiary also needs to take a minimum amount of distribution from the inherited account each year along the way, and then still empty it before the end of the 10th year.

Up through 2024, the IRS waived the penalties for beneficiaries not taking the annual distributions per above. However, starting in 2025, the IRS will no longer be waiving the penalties. Therefore, people will need to take this year’s RMD from the inherited account, if applicable.

Charitable donations (but not Qualified Charitable Distributions) – if you’re charitably inclined and are in a position where you can benefit from itemizing your donations on your tax return (i.e. you will have enough itemized deductions to exceed your standard deduction), be sure to make the donation(s) before the end of this year.

Depending on how you’re making the donation, there are certain deadlines to be aware of.

If you’re gifting securities, the date of the donation is the date the transfer of securities from your account to the account of the charity. So be sure to get the transfer/gift processed at your custodian before the end of December 31st.

If you’re writing a check to the charity, the date of the donation is the date you send the check; not the date the charity cashes. But there is potentially more nuance to it.

If you deliver the check yourself, the donation date is the date you deliver it.

If you mail the check via USPS, the donation date is the date of the postmark. This is known as the “mailbox rule.”

However, if you use a private delivery service like FedEx, the date of the donation is the date the charity receives the check and NOT the date you shipped it (i.e. the mailbox rule does not apply in this case).

Qualified Charitable Distributions (“QCDs”) – A QCD is when you donate money directly from a pre-tax IRA to a qualified charity. You need to be at least 70 ½ to do a QCD (you need to actually be 70 ½; it’s not good enough to simply be in the year you turn 70 ½), and the money needs to go directly from your IRA custodian to the charity; you cannot take the distribution to yourself and then turn around and donate the cash to the charity. Well, you can, but then it’s not a QCD. Then it’s just a normal taxable IRA distribution and subsequent donation.

What makes a QCD special and different from just taking an IRA distribution and then turning around and donating the cash is that if the money goes directly from the custodian to the charity (as opposed to first getting paid to you), the amount of the distribution does not show up in your gross income. And hence the QCD won’t potentially impact things driven off your gross income like Medicare premium surcharges, how much of your Social Security is taxable, whether or not the Net Investment Income Tax applies, etc.

Furthermore, QCDs can take the place of your RMD for the year. For example, if you have to take a $30,000 RMD from your IRA this year, but you don’t actually need all of that money AND you’re charitably inclined, you can do a QCD instead. Let’s say you distribute to yourself $20,000. But that’s $10,000 less than your RMD; you still need to take out another $10,000. However, instead of taking it as an additional $10,000 taxable distribution to yourself, you can instead do a QCD for $10,000 to a charity. And like I said before, that $10,000 won’t even show up in your gross income on your tax return (but remember to reflect the QCD accordingly in your tax return, otherwise, you might mistakenly reflect the QCD as an ordinary taxable distribution).

The total amount of QCD that can be done in 2025 is $108,000 per person. Which means a married couple could collectively QCD up to $216,000 this year.

Generally speaking, QCDs will be sent from your IRA custodian to the charity via paper check in the mail. I bring this up because the timing around when that donation/QCD is recognized is different than when normally sending checks. Or at least that’s what the Ed Slott group says, and they’re the nation’s leading experts in all things related to taxes and retirement accounts.

Unlike the mailbox rule mentioned before when mailing checks to charity, with a QCD, the timing of that donation isn’t recognized until the charity actually cashes the check. It’s not recognized when the check is postmarked in the mail.

That’s apparently because the timing of when you can recognize the QCD is dependent on the timing of when the custodian reports it on the 1099-R for the year. And per Ed Slott, custodians don’t keep track of the mailbox rule for people; they only keep track of when the charity actually cashes the check.

For example, assume you instruct your IRA custodian on December 20th to send a QCD to your favorite charity. And assume the custodian sends the check out on December 22nd and it’s postmarked on December 23rd.

However, assume the charity’s offices are closed for the rest of the year and there is no one there to actually cash the check until January. In this case, your 2025 1099-R from your IRA custodian will NOT show the QCD having left your account in 2025. Therefore you won’t get credit for the QCD in 2025; it will instead be reported on your 2026 1099-R.

This could be a problem if you were relying on that QCD to help satisfy your 2025 RMD. Now, in the example above, you will not have met your 2025 RMD and may be subject to a penalty.

Making large gifts – if you plan on gifting large sums of money, securities, etc. to family or friends (not charities), consider trying to break up your gifts into multiple years to try to not exceed each year’s annual gift exclusion. If/when you gift to someone more than the respective year’s gift exclusion amount, you need to file a Form 709 gift tax return to report the gift. It likely won’t be taxable, but it is nonetheless required to be reported to the IRS.

For 2025, the annual gift exclusion amount in making gifts to any one person is $19k. For example, assume you plan on soon giving your child $30k to buy a car. Instead of giving him or her $30k in one shot, thus triggering the requirement for you to file a gift tax return, consider breaking it up into two; one gift of no more than $19k in 2025, and then another gift of the remaining $11k in 2026.

Tax loss or tax gain harvesting – Tax loss harvesting is when you consciously sell a position at a loss in a nonqualified (i.e. regular) brokerage account. Conversely, tax gain harvesting is when you consciously sell something at a gain in a nonqualified brokerage account.

There is more to it than this but, in a nutshell, tax loss harvesting is when you want to realize the loss on a position in the current year to help reduce a realized gain you have for the year on another position, or to help reduce the taxability of the rest of your income (as you can typically deduct up to $3k of net realized loss against your other sources of income on your tax return).

If you do harvest losses in a taxable account, be cognizant of the wash sale rule, which could potentially make some or all of those realized losses not able to be realized in 2025.

Under the wash sale rule, if you buy the same or a substantially identical security within 30 days before or 30 days after the date of the sale that generated the realized loss, some or all of that loss may not be recognizable in this tax year.

And wash sales don’t only apply to purchases in the same account where the position was sold. They apply to ALL of your accounts across ALL of the different custodians you might have. And if you’re married, they apply to your spouse’s accounts, too.

For example, if you sell shares of Microsoft at a loss in your brokerage account on November 15th and then your spouse buys shares of Microsoft in his or her IRA on November 30th (i.e. within 30 days after the date of your sale) that will lead to a wash sale.

Tax gain harvesting is when you sell a position to intentionally recognize a gain in the current tax year. One of the more common and beneficial applications of tax gain harvesting is for people with otherwise really low income, where they can realize some long-term capital gains (i.e. gains on positions held more than 12 months) at a federal tax rate of zero.

Also, don’t forget to see if you have any carried over losses from 2024 that will be applied toward your 2025 tax return, as that will impact how much gain or loss you might want to harvest this year.

Prepare a pro forma 2025 tax return – while potentially complicated to do (at least to do accurately), doing a preliminary mockup of what your 2025 tax return should look like can be a helpful exercise.

Even if you already did a projected 2025 tax return for yourself earlier in the year, you most likely want to true it up now because 1) more the year has since passed and there is therefore less of the year for which you have to guess what the income will be, and 2) the One Big Beautiful Bill Act could change your 2025 tax situation vs what you originally thought it was going to be.

Doing a projected current year tax return can show if you are thus far short on paying taxes or having taxes withheld, if your income is above or below certain limits (such as if you’re trying to “fill up” a certain tax bracket with Roth conversions and finding out you still have some room left to convert more), if you’re close to being able to itemize deductions and therefore maybe pull some future year donations into the current year, etc.

If you realize you need to pay more tax, you can do so by making estimated payments, or potentially by having taxes withheld from certain income sources. Specifically, you can have taxes withheld from wages, pensions, IRA distributions, Social Security and a few other less common sources of income. However, at this point in the year, it may be difficult to have withholdings updated in time. It’s likely too late to update your Social Security withholdings, and it’s cutting it close to update your payroll withholdings at this point in the year. However, if you will be making IRA distributions, you can definitely increase your withholdings on those.

If you don’t have income sources from which you can have taxes withheld, you can also manually make an estimated payment via sending a check or doing an online ACH bank transfer to the government (i.e. either the US Department of Treasury for federal income tax and/or your state’s respective taxing authority for state income tax).

If you will be making an estimated payment for the 4thquarter, the deadline to make the payment is January 15, 2026.

And finally, some of the One Big Beautiful Bill Act’s changes that took effect this year, and therefore might impact your tax return projections for 2025 are:

Higher standard deductions for the year
The additional $6,000 extra deduction per person 65 or older (which, however, is subject to income-based phase outs that can ultimately eliminate all of the extra deduction)
The higher $40,000 limit on state and local tax itemizable deductions (which, however, is also subject to income-based phase outs that could bring the deductibility limit down to $10,000)
The deduction on up to $10,000 of interest on car loans for new cars whose final assembly was in the U.S. and where the loan was taken out no earlier than 2025

Another thing to keep in mind with some of the deadlines above – especially those that require some sort of action from your account’s custodian prior to the end of the year, such as in the case of doing a Roth conversion – is to not cut it too close.

Financial firms and custodians get REAL busy late in the year with people trying to jam through last minute distributions, Roth conversions, charitable donations of securities, etc. While each firm has its own formal policy and deadlines, assume if you submit any sort of manual request after mid-December there is a non-trivial chance the request won’t get processed before the end of the year!