2025 Year-End Tax Planning: 10 Strategies to Implement Before Dec 31
By: Brian Seay, CFA
A Fee-Only Fiduciary Advisor in Huntsville, AL
I want to start by shifting your mental framework regarding when to think about taxes. Tax time is NOW.
Many people wait until the first quarter of 2026 to talk to their CPA. By then, it is simply a matter of reporting history. However, in the 4th quarter of 2025, you still have the power to change your financial future. Once the calendar page turns, your ability to reduce your taxes and take advantage of these strategies disappears.
As a fee-only fiduciary advisor here in Huntsville, I see too many people miss out on savings because they waited too long. In our latest Capital Stewards podcast episode, I broke down 10 strategies you must consider before we close out 2025. Watch the episode or read on!
1. Why You Need Tax Projections (My "Soapbox" Issue)
If you have significant assets or annual income exceeding $250k–$300k, you cannot afford to fly blind. You need a tax projection to understand exactly where you land before year-end.
Without a projection, you risk making sub-optimal decisions regarding:
Stock Options: Knowing how much to exercise without jumping into a punitive tax bracket.
Senior Standard Deductions: Ensuring Roth conversions don't push your income over the phase-out thresholds ($150k–$250k) for state-specific deductions.
IRMAA (Medicare Premiums): Keeping your income just below the thresholds to avoid higher Medicare premiums.
2. Retirement Account Planning (401k & IRAs)
One of the most powerful tools for reducing taxable income is contributing to retirement accounts.
2025 401(k) Limits: The limit is $23,500 (under 50) and $30,500 (50+).
Employer vs. Employee: Remember, the total contribution limit (employee + employer) is nearly $70,000. If you have a side gig or cash-flowing real estate, you may be able to contribute significantly more as an "employer" to yourself.
Note for Inherited IRAs: If you inherited an IRA after 2020, the rules are complex. Ensure you review distribution requirements to avoid penalties.
3. Strategic ROTH Conversions
Think of Roth conversions as a campaign, not a one-time event. This involves moving funds from a Traditional IRA to a Roth IRA and paying taxes now to enjoy tax-free growth later.
Why do this now? Even if tax rates remain stable, your personal income bracket or RMDs (Required Minimum Distributions) in your 80s might force you into a higher bracket later. We plan these conversions to fill up lower tax brackets today to save you money tomorrow.
4. Flex Spending Accounts (FSA): Use It or Lose It
Unlike HSAs, many FSAs are "use it or lose it." Check your balance immediately. If you have funds remaining, schedule those doctor's visits, buy new glasses, or stock up on qualified medical supplies before December 31st so you don't forfeit your hard-earned money.
5. The "Triple Tax Advantage" of Health Savings Accounts (HSA)
HSAs are arguably the best tax vehicle available.
Tax-Deductible contributions.
Tax-Free growth.
Tax-Free withdrawals for qualified medical expenses.
For families in 2024/2025, contribution limits are upwards of $8,550 (plus catch-up contributions for those 55+). Do not miss out on maximizing this account.
6. Avoiding "Phantom" Mutual Fund Distributions
If you hold mutual funds in a taxable brokerage account, you might get hit with a tax bill even if you didn't sell a single share. This happens when funds pay out capital gains distributions in December.
The Strategy: Consider utilizing ETFs (Exchange Traded Funds) instead. They are generally more tax-efficient because you only pay capital gains taxes on your actual realized gains, not the fund's internal trading.
7. Tax Loss Harvesting
If you have investments that are down, you can sell them to realize a loss. These losses can be used to:
Offset capital gains.
Offset up to $3,000 of ordinary income.
Fiduciary Tip: Don't wait until December 31st. We proactively harvest losses throughout the year, but now is the time for a final review.
8. Income Planning (For Business Owners)
If you are a business owner or self-employed in the Huntsville area, you have unique levers to pull:
High Income Year? Defer income into 2026 or accelerate deductible expenses (buy that equipment now).
Low Income Year? Accelerate income into 2025 to fill up lower tax brackets.
9. Charitable Giving Strategies
First, I encourage you to be generous to your church, to your family and to your community. I always suggest defining your giving goal before you start planning for taxes. Your philanthropic goal should be the main driver, not takes. But once you figure out where to give, think about potential ways to maximize your gift or reduce your taxes before write a check. Give generously, but give smartly.
Appreciated Stock: Donating stock directly to a charity avoids capital gains taxes on the appreciation and gives you a deduction for the fair market value.
Bunching: With changes to state tax laws (OBBBA), it may make sense to "bunch" contributions into 2025 rather than spreading them out.
QCDs (Qualified Charitable Distributions): If you are 70½+, you can donate up to $100k directly from your IRA. This counts toward your RMD but stays off your taxable income line.
10. Portfolio Rebalancing
The markets have been strong this year. While we enjoy the gains, "buy low, sell high" requires us to actually sell the high performers eventually.
Now is the time to rebalance. Take some gains off the table and reinvest in areas that haven't grown as much. This isn't about predicting a crash; it's about insulating your portfolio against risk so you remain diversified for 2026.
Take the Next Step
Taxes are personal. Your situation is unique. This post is a starting point, but you need a professional to help you navigate the specific phase-outs and opportunities relevant to your wealth.
Are you looking for a Fee-Only Fiduciary in Huntsville to help you lower your tax bill before the year ends? Start a conversation with us anytime!