Year-end tax moves that could lower your bill

1.    Maximize your 401(k) contributions

Your 401(k) allows you to contribute up to $23,500 in 2025, and if you’re 50 or older, you can add an extra $7,500 in catch-up contributions. These contributions come directly from your paycheck before taxes, which means every dollar you put in reduces your taxable income for this year. By maximizing your contributions before December 31, you capture the full tax benefit for 2025 and give your retirement savings an extra year of growth. 

2.    Use your HSA for triple tax benefits

A Health Savings Account (HSA) lets you contribute pre-tax dollars that grow tax-free and can be withdrawn tax-free for qualified medical expenses. For 2025, you can contribute up to $4,300 for individual coverage or $8,550 for family coverage, with an additional $1,000 catch-up if you’re 55 or older. HSA contributions reduce your taxable income now while building a fund for healthcare costs in retirement, when medical expenses tend to increase. 

3.    Harvest investment losses for tax savings

Tax-loss harvesting is a practice of selling investments that have gone down in value to record a loss, which can balance out gains you’ve made in other parts of your portfolio. If your losses are bigger than your gains, you can use up to $3,000 to lower your regular income, and any extra losses carry forward to future tax years. A tax professional can help you determine whether this strategy makes sense for your existing portfolio.

4.    Take your Required Minimum Distribution

If you’re 73 or older with a traditional IRA or 401(k), the IRS requires you to withdraw a minimum amount each year, known as a Required Minimum Distribution (RMD). Missing your RMD triggers a penalty of 25% of the amount you should have withdrawn, though this drops to 10% if you correct it quickly. Consult with your tax advisor to confirm your specific RMD amount and deadline to avoid unnecessary penalties.

5.    Spend your FSA funds before they expire

Flexible Spending Account (FSA) money is typically “use it or lose it,” meaning funds you don’t spend by your plan’s deadline may be forfeited. Many FSA plans have a December 31 deadline, but some offer a grace period into March or allow a small carryover, so check your plan rules. Using your remaining FSA balance before it expires ensures you get the full benefit of the pre-tax dollars you set aside earlier this year. 

6.    Claim energy-efficient home improvement credits

If you've upgraded your home with energy-efficient improvements this year, you may qualify for a federal tax credit worth 30% of your project costs. Qualifying upgrades include heat pump water heaters, rooftop solar, and more. Unlike deductions that reduce your taxable income, credits lower the tax you owe dollar-for-dollar giving you another way to save come April. 


Gift yourself a head start on a financially healthy new year by wrapping up these loose ends before the calendar flips. Speak with a financial advisor who can review your situation and recommend other actions that could help you experience a prosperous 2026!