The 2025 Financial Finish Line: 5 Moves to Make Before December 31st

David Findlow |
Categories
Tax

The end of the year is a busy time of holidays, family, and reflection. It's also a hard deadline.

For your finances, December 31st is the finish line. A few smart moves made in the final weeks of the year can have a significant impact on your tax bill and your long-term wealth.

Don't let this opportunity pass. Here is a 5-point checklist to review before the clock strikes midnight on New Year's Eve.

1. Maximize Your Retirement Savings This is one of the most powerful moves you can make. Contributions to a traditional 401(k) are tax-deductible, meaning they lower your total taxable income for 2025.

  • 2025 401(k) Limit: $23,500 for employees.
  • Age 50+ Catch-Up: If you are 50 or older, you can contribute an additional $7,500.
  • SECURE 2.0 Special Catch-Up: A new provision for 2025 allows those aged 60, 61, 62, and 63 to make a larger catch-up contribution of $11,250, if their plan allows.

Check your paystubs and contact your HR department. If you haven't hit the max, consider increasing your contribution percentage for the final paychecks of the year to get as close as you can.

2. Harvest Your Losses (and Gains) Look at your non-retirement investment accounts. Do you have any investments that are "down" for the year? Selling them can be a smart tax strategy.

This is called "tax-loss harvesting." You can use these losses to offset any capital gains you realized this year. If your losses exceed your gains, you can use up to $3,000 to offset your ordinary income (like your salary), which is taxed at a much higher rate. Any remaining losses can be carried forward to future years.

Just be aware of the "wash sale" rule: you cannot rebuy the same or a "substantially identical" investment within 30 days (before or after) the sale.

3. "Bunch" Your Charitable Donations Many people can no longer deduct their charitable gifts because the standard deduction is so high. One popular strategy is "bunching." Instead of donating $5,000 every year, you might "bunch" two or three years' worth of giving into one—donating $15,000 in 2025, for example. This allows you to itemize your deductions this year, get the full tax benefit, and then take the standard deduction for the next couple of years.

A Donor-Advised Fund (DAF) is an excellent tool for this. You get the full tax deduction today, but you can distribute the money to your favorite charities over the next several years.

4. Check on Your RMDs (for Ages 73+) If you are 73 or older, you are required to take a Required Minimum Distribution (RMD) from your retirement accounts. The deadline for this is December 31st. This is critical because the penalty for missing an RMD is severe. While the SECURE 2.0 Act reduced the penalty from 50% to 25% (or 10% if corrected quickly), it's a costly and unnecessary mistake. Double-check that you have taken the full, correct amount from all your qualified accounts.

(Note: If you turned 73 in 2025, you have until April 1, 2026, to take your first RMD. However, this means you would have to take two RMDs in 2026, which could have major tax consequences. Talk to a professional.)

5. Super-Fund Your Health Savings Account (HSA) If you have a high-deductible health plan, your HSA is the most powerful savings tool you have—even more than a 401(k). It offers a triple-tax-advantage:

  • Contributions are tax-deductible.
  • The money grows tax-free.
  • Withdrawals are tax-free for qualified medical expenses.
  • 2025 HSA Limit: $4,300 (Individual) or $8,550 (Family)
  • Age 55+ Catch-Up: An additional $1,000.

Unlike a 401(k), you can make a lump-sum contribution for 2025 any time before the tax filing deadline in April 2026.

These five moves are a starting point. A brief review of your financial plan with a professional can uncover thousands in potential tax savings and set you up for a prosperous 2026.

What's the #1 financial item on your year-end checklist?

Schedule a Consultation These are general strategies and may not be right for your specific situation. If you'd like to discuss how these concepts apply to your financial plan, please feel free to schedule a complimentary call: Our Calendar