Five year-end tax measures to quickly reduce your 2025 taxes

Fiscal year 2025 is quickly coming to an end. Planning ahead now could help you reduce your tax bill and increase your savings.

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JPMorgan Asset Management chief strategist David Kelly told Yahoo Finance that many taxpayers will pay more up front in 2025 and receive a larger refund in 2026. He estimated the average refund could be $3,743, an increase of more than 17% compared to 2025, or about $557.

But how much you could save also depends on how you prepare. According to Fidelity, here are five tax-saving measures to consider.

Although April 15 is the tax filing deadline, December 31 is another important date to mark on the calendar. This is the deadline for contributions to workplace retirement plans, college savings accounts and more, Fidelity said.

You can contribute up to $23,500 to 401(k) or 403(b) plans by 2025, with an additional $7,500 catch-up if you’re age 50 or older. According to Charles Schwab, a 401(k) contribution of $20,000 could reduce your taxable income by the same amount and save you about $4,400 in federal taxes if you’re in the 22% bracket.

The deadline also applies to 529 college savings plans, which can qualify for state tax deductions and allow up to $19,000 per person in annual gifts.

And for those age 73 or older, December 31 is also the last day to take required minimum distributions (RMDs) to avoid penalties.

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If you have investments that have lost value this year, you may be able to use those losses to reduce your tax bill. Through a strategy known as tax-loss harvesting, investors can sell underperforming assets to offset capital gains from other investments, and even apply up to $3,000 of the remaining losses to ordinary income each year. Any additional losses can be carried forward to future tax years.

It’s also important to follow the wash sale rule, which prevents you from purchasing a “substantially identical” investment within 30 days before or after the sale. Currently, this rule does not apply to cryptocurrencies, but that could change, Fidelity noted.

Fewer than 10% of taxpayers itemize, Fidelity noted, but it can be worth it if your deductions exceed the standard deduction, which is $15,750 for single filers and $31,500 for married couples in 2025. Common itemized deductions include medical expenses, mortgage interest, state and local taxes (SALT), and charitable donations.

Under the One Big Beautiful Bill (OBBB), the SALT deduction limit was temporarily raised to $40,000 through 2029 for eligible taxpayers, before returning to $10,000. Additionally, taxpayers age 65 and older can claim an additional $6,000 deduction starting at certain income levels.

Several provisions, including the new senior deduction, the auto loan interest tax exemption, the overtime tax exemption, and the tip tax exemption, are available to itemizing and non-itemizing taxpayers. For example, certain tipped workers can exclude up to $25,000 of tip income and hourly workers up to $12,500 of overtime pay from taxable income in tax years 2025 through 2028.

A Roth IRA conversion allows you to transfer money from a traditional IRA to a Roth IRA, allowing you to pay taxes now so you can enjoy tax-free withdrawals later. This may make sense if you expect your income or tax rate to increase in the future, or if you want to reduce RMDs later in retirement.

With a Roth conversion, the amount you roll over is taxed as ordinary income for that year. Once converted, future qualified withdrawals, including earnings, are tax-free as long as you meet the five-year rule and are at least age 59½.

For higher-income earners who cannot contribute directly to a Roth, backdoor Roth IRA options and backdoor mega Roth options allow non-deductible contributions to be rolled over into a Roth account.

During the second quarter of 2024, Roth conversions increased 46% from a year ago, according to Fidelity data cited by CNBC. According to the publication, many advisors choose year-end Roth conversions because it is easier to project the tax consequences.

In 2025, you can give up to $19,000 per person without triggering gift taxes, or $38,000 if you are married and split the gifts. Annual gifts can also help reduce your taxable estate over time.

If you itemize, donating to a qualified charity or donor-advised fund (DAF) can provide an immediate deduction and potential capital gains savings if you donate appreciated assets like stocks.

The OBBB also made some changes to charitable giving. Starting in 2026, a new deduction will allow non-itemizers to write off up to $1,000 in cash donations, or $2,000 for joint filers. However, the maximum charitable deduction rate will drop from 37% to 35%, so high-income donors may want to make large contributions before the change takes effect.

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This article originally appeared on GOBankingRates.com: 5 Year-End Tax Moves to Quickly Reduce Your 2025 Taxes