5 Smart Year-End Tax Moves to Lower Your 2025 Tax Bill (Tax-Law Backed Guide)
As the year wraps up, now is the ideal time to make strategic tax decisions that can significantly reduce your 2025 federal tax bill. The IRS tax code offers dozens of deductions, credits, and end-of-year strategies—but only if you act before December 31.
Below are five tax-smart moves, supported by IRS rules and guidelines, that can help individuals and small business owners save real money.
1. Max Out Retirement Contributions (IRC §219, §401, §408)
Contributing to retirement accounts before the end of the year is one of the easiest ways to lower your taxable income.
Key Contribution Limits for 2025
- Traditional & Roth IRAs: Up to $6,500 (or $7,500 if age 50 or older)
- 401(k) / Solo 401(k) employee contribution: Up to $23,000 (plus $7,500 catch-up)
Traditional IRA contributions may be tax-deductible depending on income and filing status.
IRS Resources:
2. Prepay Deductible Expenses Before December 31 (IRC §162)
If you operate a business or are self-employed, prepaying certain expenses this year can reduce 2025 taxable income.
Common year-end prepayments include:
- Rent
- Utilities
- Insurance premiums
- Office supplies
- Professional services (legal, accounting, marketing)
Under IRC §162, ordinary and necessary business expenses are deductible in the year incurred. Cash-basis taxpayers can often deduct them when paid.
IRS Resource:
Business Expenses: https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses
3. Take Advantage of Bonus Depreciation & Section 179 (IRC §168 & §179)
Purchasing equipment or business assets before December 31 can unlock major tax savings.
Two Key Tax Tools:
- Bonus Depreciation (IRC §168(k))
Allows large deductions for qualifying assets placed in service before year-end. - Section 179 Deduction (IRC §179)
Lets businesses immediately deduct the full purchase price of equipment, software, and certain vehicles.
These strategies can significantly reduce taxable income, especially for small business owners upgrading equipment.
IRS Resources:
4. Harvest Investment Losses to Offset Gains (IRC §1211, §1212)
Tax-loss harvesting involves selling investments at a loss to offset capital gains.
You can use losses to:
- Offset unlimited capital gains
- Offset up to $3,000 of ordinary income annually
- Carry forward unused losses indefinitely
This strategy must be implemented before December 31 and requires attention to the wash-sale rules, which prevent repurchasing a “substantially identical” investment within 30 days.
IRS Resource:
Capital Losses:
5. Make Last-Minute Charitable Contributions (IRC §170)
Charitable donations made by December 31 are deductible if you itemize.
Eligible donations include:
- Cash contributions
- Donor-advised fund contributions
- Qualified stock donations
- Charitable mileage and noncash goods
Be sure the organization is IRS-recognized and retain proper documentation.
IRS Resources:
Contact us today to schedule a confidential consultation and take proactive steps toward lowering your 2025 tax liability.
