Beyond Tax Season

Year-End Tax Planning Tips: Get Ahead Before December 31

As 2025 comes to a close, now is the time to take proactive steps to reduce your taxable income, maximize deductions, and prepare for the upcoming tax season. From retirement contributions to energy credits and digital asset reporting, here are essential strategies to consider before December 31.

Eduardo De Leon Velasco

18 Oct 2025 — 3 min read

Photo by Eric Rothermel / Unsplash

1. Maximize Retirement Contributions

Contributing to retirement accounts such as 401(k)s and IRAs can reduce taxable income.

For 2025, the 401(k) contribution limit is $23,500, with an additional $7,500 catch-up contribution for those aged 50 and older.
The IRA contribution limit remains $7,000, with a $1,000 catch-up contribution for eligible individuals.

2. Take Advantage of Energy Efficiency Credits

Homeowners can claim up to $3,200 annually in tax credits for energy-efficient home improvements:

Up to $1,200 for home envelope upgrades (windows, doors, insulation).
Up to $2,000 for installing heat pumps or biomass stoves.

Starting in 2025, qualifying items must be produced by a certified manufacturer, and taxpayers must report the product’s PIN on their tax return.

3. Harvest Tax Losses

Offset capital gains by selling underperforming investments to realize losses. This tax-loss harvesting strategy can reduce taxable income by up to $3,000 annually for individuals, or $1,500 for married individuals filing separately.

4. Review Charitable Contributions

Donations to qualified charities may be deductible if you itemize. To qualify:

Contributions must be made by December 31.
Keep receipts or acknowledgment letters for donations over $250.
Non-cash donations (clothing, household items) must be in good condition.

5. Check Withholding and Estimated Taxes

Avoid underpayment penalties by ensuring enough tax is withheld or estimated payments are made. Use the IRS Tax Withholding Estimator to review your situation. The fourth-quarter estimated tax payment deadline is January 15, 2026.

6. Utilize Flexible Spending Accounts (FSAs)

Most FSAs have a “use-it-or-lose-it” rule, meaning unused funds may be forfeited. For 2025:

The maximum FSA contribution is $3,300.
Employers may allow up to $660 to carry over.

7. Plan for Required Minimum Distributions (RMDs)

Individuals aged 73 or older must take RMDs from traditional IRAs and 401(k)s by December 31 to avoid a 25% excise tax on the amount not withdrawn.

The first RMD can be delayed until April 1 of the following year, but this will require taking two RMDs in one year, which could increase your taxable.

8. Claim Education Tax Benefits

Taxpayers paying for higher education expenses may qualify for:

American Opportunity Tax Credit (AOTC)
Lifetime Learning Credit (LLC)

Make sure to receive Form 1098-T from your educational institution to claim these credits.

9. Prepare for Digital Asset Reporting

Income from digital assets (such as cryptocurrency) must be reported. Gather records of all transactions, including purchases, sales, and exchanges, to ensure accurate reporting.

10. Review Filing Status and Life Changes

Major life events, such as marriage, divorce, or the birth of a child, can impact your filing status and eligibility for certain credits. Update your information with the IRS and Social Security Administration if needed.

Final Thoughts

Year-end tax planning is about more than just filing. It’s about making smart financial moves to reduce your tax bill and prepare for the future. Acting now can save money, reduce stress, and help you start 2026 on solid financial ground.

At De Leon Tax Services, we’re here to help you take advantage of every deduction and credit available. Book your year-end tax planning appointment today, and let’s get ahead before the year closes.

📞 Contact us to schedule your session before December 31, 2025.