Financial authors, like me, try to write timely content. That is why you see so many year-end tax tips in December, when tax filing deadlines are quickly approaching. However, that is more of a trick than a treat (belated Halloween pun intended), given that those year-end articles do not give you much time to get things done. That is why I wrote this weirdly out-of-season list of year-end 2025 tax tips: so you have time to take action if there is an opportunity for you.
If you are a high earner in 2025, Congress’ mid-summer law, the One Big Beautiful Bill Act (OBBBA), did two big things for families like yours: First, it raised or extended some deductions and caps for 2025 (for instance, a bigger state and local tax deduction), and second, it changed the math for 2026 and beyond on itemizing and charitable giving (new caps and floors). What you do before December 31, 2025, can be worth more than the same move on January 1, 2026. Talk to your financial advisor about steering you through these tax-avoidance tips.
1) Start with “easy buttons,” but use 2025’s levers
Max your workplace plan now
If you have a 401(k)/403(b), you can contribute up to $23,500 for 2025, plus a $7,500 catch-up if you are 50 or older. Ages 60 to 63 get a supersized catch-up of $11,250 (plan permitting). Those are real tax-rate reducers if you are making traditional pre-tax contributions, and they are hard to replace after New Year’s.
A couple from Williamstown, both partners at professional firms, had been letting payroll deferrals drift. I hard-capped their remaining pay periods so the last checks of the year “auto-swept” to the plan. That single tweak locked in five-figure pre-tax savings and helped them stay under a Medicare IRMAA (income-related monthly adjustment amount) threshold they were about to trip.
Health Savings Account (HSA)
If you are in a high-deductible plan, HSA dollars reduce taxable income, grow tax-deferred, and are tax-free for qualified medical costs.
Roth conversions: fill, don’t spill
When investment values are down or your 2025 income is softer than usual, a partial conversion can lock in more tax-free growth without pushing you into the next bracket. But remember that conversions raise adjusted gross income, which can reduce how much of the new state-and-local-tax (SALT) deduction you keep (more on that below). You need to model the bracket line and stop.
Required Minimum Distributions (RMDs): the tax ripples you need to know
If you are 73 or older, your 2025 RMD must come out by December 31, or you face a penalty of 25 percent (potentially 10 percent if corrected within two years). First-timers can wait until April 1 of the following year, but doing so can result in two RMDs being stacked into one tax year, which can be a bad idea.
A retired West Stockbridge executive wanted to defer his first RMD to April. I explained to him how the double-RMD year would increase his Medicare premiums and reduce his new SALT deduction. He took the RMD in December and avoided both problems.
2) Make the new SALT rules work for you (but watch the phase-down)
For 2025–2029, the SALT cap is $40,000 per return; it inflates one percent in 2026–2029 and then drops back to $10,000 in 2030. There is a catch: The cap phases down when your modified AGI exceeds $500,000 (half that if you file separately), and it never drops below $10,000. Practically, if your 2025 income is between $500,000 and $600,000, you may not get the full $40,000 deduction; above $600,000, and you are back at $10,000.
How-to: Before year-end, add up what you have already paid in state income and property taxes. If you are below the cap and below the phase-down income, consider prepaying the January property tax bill or state quarterly estimate in December, but only if you will truly itemize in 2025 (see charitable strategy next).
A Great Barrington family with around $520,000 AGI was planning to prepay $15,000 of their 2026 Q1 state tax. My model indicated that their SALT cap would be phased down, meaning the prepayment would have been partly wasted. I dialed back the prepay and redirected dollars to a donor-advised fund instead, flipping them from standard deduction to itemizing and netting a bigger overall benefit.
3) Charitable giving: 2025 is special
Two OBBBA changes arrive next year that change the calculus:
- Non-itemizers will get a permanent charitable write-off up to $1,000 ($2,000 if married filing jointly) for cash gifts to public charities, but only beginning in 2026.
- Itemizers face a new floor of 0.5 percent of AGI for charitable deductions starting in 2026, and the law also reinstates a limitation that effectively caps the tax value of itemized deductions at 35 percent for top-bracket taxpayers. Your 2025 charitable dollars are potentially worth more in tax savings than the same dollars in 2026.
How-to: If you are planning a sizable multi-year gift, bunch several years into 2025, to get above the standard deduction and harvest the full 2025 value. Donate appreciated securities to avoid capital gains and deduct the fair market value.
Qualified charitable deductions
If you are at least 70 years and six months old, you can give up to $108,000 (2025) directly from an IRA to charity. QCDs count toward your RMD but do nont hit AGI, which is huge for Medicare brackets and the SALT phase-down math. For couples who both qualify, it can be $216,000.
A Lenox widow planned $90,000 of cash gifts and a $50,000 DAF grant. I reframed it: $108,000 as a QCD from her IRA, plus appreciated shares into the DAF for the balance. Her AGI dropped, she cleared the SALT phase-down, and Medicare premiums stayed put.
Paperwork matters: High-value non-cash gifts require a qualified appraisal and Form 8283. To ensure timely settlement, initiate custodial transfers to the DAF early in December.
4) Harvest losses and dodge unwanted fund distributions (the tidy-up)
Use year-end to tax-loss harvests in taxable accounts to offset realized gains and up to $3,000 of ordinary income (carry any extra forward). If your mutual fund is set to distribute capital gains in November or December, consider selling before the record date and swapping to a similar exchange-traded fund (not substantially identical, to avoid wash-sale issues).
A North Adams investor held a legacy active fund set to distribute a heavy gain. I sold before the record date and rotated to a tax-efficient ETF “twin.” Their exposure barely budged, but their tax bill was reduced.
Protect your money from taxes
The complete IRS tax code and its related guidance are over 70,000 pages. (The commonly referenced Title 26 portion of the code is “only” 2,600 pages.) It is not easy to navigate. I use a handful of powerful software to navigate it, so do not feel bad if even these “easy buttons” feel complicated. A best practice is to forward this article to your financial advisor, allowing them to schedule a meeting with you to review the scenarios on their own model-building software.
Allen Harris is an owner of Berkshire Money Management in Great Barrington and Dalton, managing more than $1 billion of investments. Unless specifically identified as original research or data gathering, some or all of the data cited is attributable to third-party sources. Unless stated otherwise, any mention of specific securities or investments is for illustrative purposes only. Advisor’s clients may or may not hold the securities discussed in their portfolios. Advisor makes no representation that any of the securities discussed have been or will be profitable. Full disclosures here. Direct inquiries to Allen at AHarris@BerkshireMM.com.
