8 Ways to Reduce Your 2025 Tax Bill Before Year’s End

1. Understand your 2025 tax landscape and where your liability currently stands.   

The first step is, of course, to know where you stand. Understanding which tax bracket you're in—and more importantly, how to potentially stay in a lower one—is crucial for effective tax planning. A key income threshold to watch for high-income filers is $197,300 for single filers and $394,600 for married couples filing jointly. These are the thresholds for moving from the 24% to the 32% tax bracket, making income timing strategies particularly valuable for those approaching these levels. 

2. Maximize your retirement contributions. 

One of the most effective ways to reduce your current tax bill is by maximizing contributions to tax-deferred retirement accounts. Every dollar you contribute to a traditional IRA or 401(k) reduces your taxable income dollar-for-dollar, providing immediate tax relief. So, review your current contribution levels and increase them if possible. If you're over 50, don't forget about catch-up contributions that allow you to save even more. 

If you have a 401(k), 403(b), or a governmental 457 plan or Thrift Savings Plan, your maximum contribution increases to $23,500 for 2025. If you have an IRA, you can contribute up to $7,000 for tax year 2025, the same as for tax year 2024. And if you're over 50, you can contribute an additional $1,000 per individual.  

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 3. Leverage Health Savings Accounts (HSAs). 

HSAs offer a rare triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. If you are eligible to contribute to an HSA, contribution limits are $4,300 for self-only coverage and $8,550 for family coverage for 2025. There are no carryover limits, so if you haven’t yet hit the maximum contribution for this year and you want to reduce your tax liability, making an additional contribution to your HSA is a great way to do so. 

4. Take advantage of Flexible Spending Accounts (FSAs). 

If you have an FSA, be sure to use all the funds by year’s end, as funds cannot be carried over to next year. For 2026, the IRS increases the maximum you can contribute tax-free to a dependent care account to $7,500 per household (or $3,750 if married filing separately), potentially providing significant savings for families with childcare expenses. So plan accordingly by contributing more funds to this account next year.  

5. Implement Tax-Loss Harvesting 

If you have investment accounts outside of retirement plans, tax-loss harvesting can be a valuable strategy. If you sold other investments at a loss, you can use those losses to offset your gains. This tactic, called tax-loss harvesting, helps lower your overall tax bill. You can even deduct up to $3,000 of net capital losses against your regular income each year if your losses exceed your gains. Review your investment portfolio with your financial advisor to identify opportunities for tax-loss harvesting before year-end. 

6. Consider Charitable Giving Strategies 

A donor-advised fund is a charitable fund you can set up that allows you to decide how and when to allocate funds to individual charities. You can make contributions this year and take the full tax deductions on your tax return, thus reducing your tax bill. This strategy is particularly effective if you expect to be in a higher tax bracket this year or if you've had an unusually high-income year due to bonuses, stock options, or other windfalls. 

7. Plan for Education Expenses 

If you have children, grandchildren, or are considering further education for yourself, consider contributing to a 529 college savings account, where earnings and withdrawals are federal income tax-free when used for qualified education expenses. 

While 529 contributions aren't deductible on your federal return, many states offer tax deductions or credits for contributions to their state's plan, providing immediate tax benefits while saving for education expenses. 

8. Review Your Withholdings and Estimated Payments 

As we progress through 2025, it's important to review whether you're having enough tax withheld from your paychecks or if you need to adjust your estimated quarterly payments. The goal is to avoid both overpaying (which gives the government an interest-free loan of your money) and underpaying (which can result in penalties). 

Now and all year long, remember that timing is everything when it comes to taxes. 

Many of these strategies require action well before December 31st. For instance, if you want to maximize your 401(k) contributions, you need to adjust your payroll deductions now to ensure you hit the annual limit. Similarly, tax-loss harvesting should be considered throughout the year, not just at year-end. 

The expiration of the Tax Cuts and Jobs Act (TCJA) at the end of 2025 may catch some high-income individuals off-guard. While recent legislation has extended many TCJA provisions, it's still important to plan for potential changes and consider strategies that might be more valuable this year than next. 

Effective tax planning isn't about finding loopholes or taking excessive risks—it's about using legitimate strategies to legally minimize your tax burden while supporting your long-term financial goals. The strategies outlined above work best when implemented as part of a comprehensive financial plan. 

Remember, tax laws are complex and constantly changing. What works for one person may not be appropriate for another, depending on their income level, family situation, and financial goals. 

At WHZ Strategic Wealth Advisors, our "Plan Well. Invest Well. Live Well.™" process includes comprehensive tax planning strategies tailored to your unique situation. We're committed to being your partner every step of the way—that's how we work to deliver on our promise to help provide you with "Absolute Confidence. Unwavering Partnership. For Life." 

Schedule your complimentary consultation today to see how we can work together to ensure you're satisfied come tax season. 

Authored by Vice President, Associate Financial Advisor Holly C. Wanegar, CFP®. AI may have been used in the research and initial drafting of this piece. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.