Commentary · Commentary

Year-End Tax Planning: A 2025 Checklist

Written by the William Allan team · Published 2025-09-22

This article discusses planning for the 2025 tax year. The figures below are 2025 limits; many deadlines have passed, while some employer-plan deadlines may extend into 2026. Confirm the applicable year and deadline before acting.

The final months of the year bring busy schedules filled with family, holidays, and business wrap-ups. But it’s also the most important window to revisit your tax and investment strategy. The moves you make between now and December 31 can have a lasting impact on your tax bill, retirement savings, and overall financial health.

Rather than waiting until tax season to react, proactive year-end planning allows you to take control. Here are several strategies that can help individuals, families, and business owners maximize their opportunities.

1. Harvesting Gains & Losses

Markets fluctuate throughout the year, and not every investment will perform the way you expect. That doesn’t mean losses are wasted. Allowable capital losses in taxable accounts can offset capital gains. This is called tax-loss harvesting. Check the IRS wash-sale rules, including purchases of substantially identical securities within 30 days before or after a loss sale and relevant purchases in other accounts.

• Hypothetical example: A $10,000 capital gain and an allowable $7,000 capital loss leave $3,000 of net gain, assuming no other gains or losses. The applicable tax rate also depends on holding periods and the taxpayer’s circumstances.

• Net capital losses may offset up to $3,000 of other income annually, or $1,500 if married filing separately, with eligible unused losses carried forward.

This strategy can be particularly useful for investors who rebalanced portfolios during 2025’s market volatility.

2. Maximize Retirement Contributions

Eligible pre-tax retirement contributions can reduce current taxable income. Roth contributions have different tax treatment. Year-end is the deadline for many employee deferrals, while IRA and some employer contributions can have later deadlines.

• 401(k) Plans: For 2025, the employee deferral limit was $23,500. The usual age-50 catch-up brought the total to $31,000. Participants who turned 60 through 63 during 2025 could contribute up to $34,750 if their plan allowed the higher catch-up. These are employee deferral limits, not the combined employee-and-employer limit.

• Traditional IRAs: Contributions may be deductible, depending on eligibility, income, filing status, and workplace-plan coverage. Eligible 2025 contributions generally could be made through April 15, 2026.

• SEP IRAs for Business Owners: For 2025, employer contributions generally could not exceed the lesser of 25% of eligible employee compensation or $70,000. Self-employed owners use a special net-earnings calculation. Eligible employer contributions may be made by the business return deadline, including extensions.

The IRS 2025 retirement-limit notice provides the annual figures, and Publication 560 explains small-business plan rules. Contribution eligibility, plan terms, and deadlines should be checked before acting; tax benefits and investment growth are not automatic.

3. Charitable Giving Strategies

The end of the year is when many people make charitable contributions, and there are tax-smart ways to do it.

• Donor-Advised Funds (DAFs): An eligible contribution completed in 2025 could qualify for a 2025 itemized deduction, subject to limits and documentation. The sponsoring charity takes legal control of the assets; the donor may recommend later grants. A contribution does not guarantee an immediate deduction of the full amount.

• Qualified Charitable Distributions (QCDs): For 2025, an eligible person age 70½ or older could exclude up to $108,000 of qualifying direct IRA gifts, subject to the QCD rules and any reduction for deductible IRA contributions made at age 70½ or later. A qualifying gift can satisfy an applicable IRA RMD, but the excluded amount cannot also be deducted as a charitable contribution.

• Appreciated Assets: Donating eligible appreciated securities held more than one year may avoid realizing the gain and may support a fair-market-value deduction if you itemize. Recipient eligibility, adjusted-gross-income limits, and documentation matter. IRS Publication 526 explains charitable deductions; Publication 590-B covers QCDs.

4. Business Owner Benefits

For entrepreneurs, year-end tax planning is especially valuable. The tax code offers multiple incentives that can reduce liability and free up cash flow.

• Section 179 Deductions: Eligible business equipment or software placed in service during the year may qualify for immediate expensing. For 2025, the general dollar limit was $2.5 million, reduced when qualifying property placed in service exceeded $4 million. Business-income limits and property-specific restrictions also apply. See IRS Publication 946.

• Review Payroll: Review owner compensation and any proposed bonus with your tax professional. Entity type, accounting method, related-party rules, and payment timing affect deductibility.

• Retirement Plans: Review plan eligibility, setup deadlines, employee obligations, and available contribution deductions before choosing a 401(k), SIMPLE IRA, or SEP IRA.

5. Don’t Overlook the Basics

Sometimes the most effective strategies are the simplest:

• Confirm you’ve withheld enough taxes to avoid penalties.

• Review flexible spending account (FSA) balances and the plan’s applicable deadlines, grace period, or carryover provisions.

• Revisit beneficiary designations to ensure they’re up-to-date.

The Bottom Line

December 31 isn’t just the end of the calendar year—it’s the deadline for many of the most impactful tax strategies. For the 2025 planning season, reviewing those deadlines created time to evaluate investment losses, contributions, gifts, and business deductions. Whether a strategy reduced a particular tax bill depended on eligibility and the full return. Use current-year rules for a new planning decision.

Don’t wait until April to find out what you could have done differently. Year-end is your opportunity to act.

This commentary is for informational purposes only and is not investment, tax, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.