Year-End Tax Planning

Ideally, you have strived to minimize your taxes all year. Good news! Here are some year-end strategies that may help cut your tax bill even more. Before implementing these or any yearend strategies, talk with your tax advisor.

Defer or Accelerate Income

Project whether you'll have higher taxable income in 2024 or 2025. If it's 2025, investigate receiving your employer bonus, investment and business income, etc., this year.

Do the opposite if, for example, you expect to lose a dependent, have a spouse taking leave, suffer business losses, etc., and will have less taxable income in 2025.

Bunch Deductions

For instance, if medical expenses for 2024 year exceed the deductible minimum threshold of 7.5% of adjusted gross income (AGI), squeeze in medical expenses planned for 2025 to maximize tax 2024 savings.

Before bunching any expenses into 2024, consider your overall tax brackets for this tax year and 2025. If you anticipate income increasing enough in 2025 to put you in a higher bracket, it may make sense to postpone a deduction.

Top Off Your Health Savings Account

You have until the April 15, 2025, tax filing deadline to make Health Savings Account (HSA) contributions for this year. If you haven't already maximized your contribution, do so. HSA contributions and earnings are generally excluded from taxable income. Distributions aren’t taxed if they’re used to pay qualified medical expenses. Other requirements apply, such as being enrolled in a high-deductible medical plan.

HSA Contribution Limits

For planning purposes, compare the 2024 and new 2025 inflation-adjusted limits.
Individual
2024 = $4,140
2025 = $4,300

Family
2024 = $8,300
2025 = $8,550

Additional Catchup (for those 55 and older)
2024 = $1,000
2025 = $1,000

Review Your Charitable Giving Program

Reviewing your 2024 charitable gifting effectiveness and potential tax benefits may minimize 2024 taxes and help significantly impact 2025.

Make sure your 2024 expectations were reasonable based on your and the charity’s timescale for change and the nature of the work. Consider how giving more might increase impact and reduce taxes.

If you’re retired, check out this option for increasing 2024 gifts—a direct individual retirement account distribution to charity. The distribution is potentially excludable from income and can satisfy your individual retirement account required minimum distributions for 2024.