December doesn’t mean you’ve missed your chance to lower your tax bill. By acting before December 31, you can still take advantage of several year-end strategies to reduce your 2025 liability.
Defer Income and Accelerate Deductions
Push Income Into 2026
Delaying income until January can reduce your taxable income for 2025. For example:
- Ask your employer to postpone a bonus until the new year.
- If self-employed, hold off on sending invoices so payments arrive in 2026.
Accelerate Deductible Expenses
Since deductions apply in the year you pay them:
- Make your January 2026 mortgage payment in December to deduct the interest now.
- Pay your 2026 property tax bill before December 31 to claim it on your 2025 return (subject to SALT limits).
Be cautious if you expect to be in a higher tax bracket next year or if this strategy affects your qualified business income deduction.
Harvest Investment Losses
Selling investments at a loss before year-end can offset taxable gains:
- Losses offset gains dollar-for-dollar.
- Excess losses can reduce ordinary income by up to $3,000 ($1,500 if married filing separately).
- Remaining losses carry forward to future years.
Donate Appreciated Stock to Charity
Instead of donating cash, consider giving appreciated stock:
- Deduct the fair market value of the shares (if you itemize).
- Avoid paying capital gains tax on the appreciation.
Don’t donate stock worth less than its purchase price. Sell it first to claim a capital loss, then donate the proceeds for a charitable deduction.
Maximize Retirement Contributions
Contributing to retirement accounts can significantly reduce taxable income:
- 401(k): Up to $23,500 pretax for 2025.
- SIMPLE IRA: Up to $16,500.
- Traditional IRA: $7,000 limit (deduction may vary).
- SEP IRA: Up to 25% of net income, capped at $70,000.
Catch-Up Contributions
- Age 50+: Extra $7,500 for 401(k), $3,500 for SIMPLE, $1,000 for IRA.
- Ages 60–63: Additional $3,750 for 401(k), $1,750 for SIMPLE.
Deadlines
- 401(k) and SIMPLE: December 31, 2025.
- IRA: April 15, 2026.
- SEP IRA: October 15, 2026 (extended filing deadline).
Act Quickly
Most strategies must be completed by December 31, 2025. Don’t wait — explore these options now to lock in savings.