Year-End Tax Strategies: Your 2025 Financial Game Plan

As we head into the final quarter, there's electricity in the air. College football teams are battling for conference championships and playoff spots. Every game matters. Every yard counts. The difference between a good season and a great one often comes down to how teams perform in these final, crucial weeks.

Your financial future works the same way.

Just like our favorite teams are looking to finish their seasons strong, you have an opportunity to make meaningful progress before the clock runs out on 2025. The end of the year isn't just a deadline; it's prime time to take control of your financial future, lock in tax advantages, and strengthen your retirement plan.

Let's break down your game plan.

The Fourth Quarter Playbook: Three Power Moves

Championship teams don't coast through the final weeks of the season, they execute their game plan with precision. Here are three key strategies to consider before December 31st that may help you keep more of what you earn and build a stronger financial future.

1st Down: Max Out Your 401(k) – Lock in Your MVPs

The Play: Contributing to your 401(k) is like having your best players on the field. For 2025, you can contribute up to $23,500 to your 401(k), and if you're 50 or older, you can make catch-up contributions of an additional $7,500, bringing your total to $31,000.

Why It Wins:

• Immediate Tax Savings: Every dollar you contribute reduces your taxable income now. If you're in the 24% tax bracket, maxing out your 401(k) could save you over $5,500 in federal taxes.
• Compound Growth: The earlier and more consistently you save, the more time your money has to grow. Think of compound interest as your offensive line, it does the heavy lifting over time.
• Employer Match: If your company offers matching contributions, not taking full advantage is like leaving points on the board. It's free money for your retirement.

The Strategy: Even if you haven't been contributing all year, increasing your contribution percentage now can help you finish strong. Calculate how much you can contribute in the remaining pay periods—every dollar counts.

Pro Tip: For 2025, the contribution limit increases to $23,500, so now's a great time to plan ahead and adjust your contributions for next year.

2nd Down: Roth Conversion – Playing the Long Game

The Play: A Roth conversion means moving money from a traditional IRA or 401(k) into a Roth IRA. You'll pay taxes on the conversion amount now, but all future growth and withdrawals will be tax-free.

Why It Wins:

• Tax-Free Future Income: Once money is in a Roth, it grows tax-free and comes out tax-free in retirement. That's a game-changer when you're living on a fixed income.
• No Required Minimum Distributions (RMDs): Unlike traditional IRAs, Roth IRAs don't force you to take distributions at age 73. You control when and how much you withdraw.
• Strategic Tax Planning: If your income is lower this year (perhaps you're between jobs, semi-retired, or had a down year), converting now means paying taxes at a lower rate.
• Legacy Planning: Roth IRAs pass to heirs tax-free, making them powerful wealth transfer tools.

When to Run This Play:

• You expect to be in a higher tax bracket in retirement
• You have cash available to pay the tax bill without dipping into the IRA
• You want to reduce future RMDs that could push you into a higher tax bracket
• Tax rates may increase in the future (and many experts believe they will)

The Strategy: You don't have to convert everything at once. Consider doing partial conversions over multiple years to manage your tax bracket. Think of it as a series of first downs rather than trying to score on one long bomb.

The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you’re required to take a minimum distribution in the year of conversion, it must be completed before converting.

To qualify for tax-free withdrawals, you must generally be age 59½ and hold the converted funds in the Roth IRA for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions.

3rd Down: Tax-Loss Harvesting – Turn Setbacks into Opportunities

The Play: Markets go up and down, that's part of the game. Tax-loss harvesting means selling investments that have lost value to offset capital gains you've realized elsewhere. It's like turning a fumble into field position.

Why It Wins:

• Offset Capital Gains: Losses can offset gains dollar-for-dollar. If you sold winners earlier in the year, harvesting losses can reduce or eliminate the tax bill on those gains.
• Reduce Ordinary Income: If your losses exceed your gains, you can use up to $3,000 to offset ordinary income. Any remaining losses carry forward to future years.
• Portfolio Rebalancing: Tax-loss harvesting allows you to reposition your portfolio without the full tax impact, like making halftime adjustments.

Watch Out for the Penalty Flag: The IRS has a "wash sale" rule: you can't buy the same or a "substantially identical" security within 30 days before or after the sale. Breaking this rule disallows the tax loss. Work with your advisor to ensure you stay compliant while maintaining your investment strategy.

The Strategy: Review your portfolio for underperforming positions. If you believe in the long-term strategy, you can sell the losing position, harvest the tax loss, and invest in a similar (but not substantially identical) investment to maintain your market exposure.

The Two-Minute Drill: Time is Running Out

In football, the two-minute drill is when teams execute with urgency and precision. The same applies to your year-end tax strategy.

December 31st is the hard deadline for most of these moves:

• 401(k) contributions must be made by December 31st
• Tax-loss harvesting must be completed by December 31st
• Roth conversions must be completed by December 31st

However, while IRA contributions have until Tax Day (April 15, 2026), reviewing your retirement savings now gives you time to plan and make strategic adjustments.

Don't wait until the final seconds on the clock. The best plays are the ones you have time to execute properly.

Halftime Adjustments: Additional Moves to Consider

Review Your Withholding

Is your paycheck withholding too much or too little? Adjusting now can help you avoid a big surprise (or missed opportunity) come tax time.

Charitable Giving

If you're charitably inclined, bunching donations into this year can help you exceed the standard deduction threshold and maximize your tax benefit. Consider donor-advised funds or qualified charitable distributions (QCDs) if you're over 70½.

Health Savings Accounts (HSAs)

If you have a high-deductible health plan, HSA contributions offer a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

The Championship Mindset: It's Not Over Until It's Over

Championship teams execute in crunch time. The end of the year isn't just a deadline; it's your opportunity to build a stronger foundation with more retirement savings, better tax diversification, and greater control over your financial future.

 

These strategies work best when customized to your unique situation. Let's review your financial picture and execute a year-end game plan that sets you up for success in 2026 and beyond.

This information is for educational purposes only and should not be considered tax or legal advice. Tax laws are complex and change frequently. Please consult with a qualified tax professional or financial advisor before implementing any of these strategies. All investing involves risk including loss of principal. No strategy assures success or protects against loss.