Only 31 days until 2026! By taking certain steps before the end of the year, you might be able to significantly reduce your 2025 tax bill. This month, we’ll go over some things to review before the end of the year.
Review Major Life-Event Taxes
If any of these happened in 2025, adjust your tax planning as they can change your deductions, tax bracket and filing status.
• Marriage or divorce
• Birth or adoption
• Home purchase or sale
• Large medical bills
• Inheritance
• Starting or closing a business
Review Your Withholding & Estimated Taxes
Do you hate having to pay penalties for not having adequate withholding or quarterly payments? You can avoid these via the IRS “Safe harbor rules.” These rules protect taxpayers from underpayment penalties as long as they meet certain minimum payment requirements — even if they end up owing more tax when they file. These are most commonly used for estimated tax payments. Here’s how it works: pay at least 90% of the tax you owe for 2025 or pay 100% of your 2024 tax (110% if your income was over $150,000) to avoid any penalties.
Decide Whether to Itemize or Take the Standard Deduction
For 2025, the standard deduction for single filers is $15,750 and for joint filers it’s $31,500. So, now you need to tally up your eligible itemized deductions to see which approach is best for you.
As a reminder, itemized deductions can include:
• Medical expenses that are over 7.5% of AGI. So, if possible, schedule elective procedures or pay medical bills before year-end if it helps surpass the 7.5% of AGI threshold.
• State and local taxes up to $40,000 in 2025 (deduction is reduced or even eliminated for high-income filers).
• Mortgage interest on qualified loans. Interest on your mortgage, points and prepaid interest and Home Equity Loans and Lines of Credit (HELOCs) used to buy, build or substantially improve your home are deductible.
• Charitable contributions. You can donate cash or appreciated investments. If you’re 70½+, you can make Qualified Charitable Distributions (QCDs). A QCD is a direct transfer of money from your traditional IRA to a qualified charity. In 2025, the contribution is limited to $108,000 per person. A QCD is excluded from your taxable income. And better yet, if you’re 73+ and required to take a Required Minimum Distribution (RMD), a QCD satisfies part or all of your RMD.
• Casualty or theft losses are deductible only if the loss is from a federally declared disaster like a hurricane, wildfire, or flood officially declared by FEMA. (Not deductible for losses from typical theft, car accidents or minor incidents outside of declared disasters.)
• Other deductions can include unreimbursed business expenses (if allowed) and investment interest (that is, interest paid on money borrowed to buy investments that generate taxable income).
• If your itemized deductions are just below the standard deduction, consider “bunching” expenses into one year. For example, prepaying property taxes or charitable contributions before December 31.
• Maximize your HSA and FSA contributions and remember to use up your FSA funds if they can’t be rolled over (which is typical).
• Capital Gains & Tax-Loss Harvesting. You can offset capital gains by selling losing positions. In addition, you can use up to $3,000 of net capital losses against ordinary income.
Check Tax Credits
See if you quality for any tax credits. (As a reminder, a tax credit is a dollar-for-dollar reduction in the amount of tax you owe.)
• Child Tax Credit
• Earned Income Tax Credit
• Education credits (American Opportunity Tax Credit and/or Lifetime Learning Credit)
• EV credits — if the vehicle was purchased by September 30, 2025.
• Energy-efficient home improvements credit (if you upgraded your home in 2025).
Consider Gifting & Estate Moves
In 2025, you can give up to $18,000 per recipient tax-free without affecting your lifetime estate and gift tax exemption. No gift tax is owed and the gift is excluded from your taxable income.
Whew, that’s quite a lot to consider. If you’d like some help thinking about all of this, or any other financial matter, we’d be pleased to meet with you in a no-charge, no-obligation initial meeting. Please visit our website or give us a call at 970.419.8212 to set up an in-person or virtual meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.