Your 2025 End-of-Year Tax Checklist

Core Insights - Year-end tax planning is crucial for aligning with financial realities and avoiding surprises in tax liabilities, emphasizing the importance of proactive adjustments and strategic contributions [21]. Tax Planning Strategies - Safe Harbor Payments: It is recommended to pay either 90% of the current year's tax or 100% of the previous year's tax to avoid underpayment penalties [1]. - W-4 Adjustments: Individuals should update their W-4 forms following significant life changes, such as new jobs or income sources, to ensure proper withholding [2]. - IRS Tax Withholding Estimator: Utilizing this tool can help individuals compare current withholdings against projected income, allowing for necessary adjustments before year-end [3]. Retirement Contributions - 401(k) Contributions: For 2025, individuals can contribute up to $23,500 to a 401(k), with additional catch-up contributions available for those aged 50 and older [6]. - IRA Contributions: Up to $7,000 can be contributed to a traditional or Roth IRA for the 2025 tax year, with a deadline of April 15, 2026, for contributions to count towards 2025 [6]. - Health Savings Accounts (HSA): Eligible individuals can contribute $4,300 for individuals or $8,550 for families, with additional catch-up contributions for those aged 55 and older [6]. Charitable Contributions - Documentation for Charitable Giving: Keeping proper receipts and acknowledgment letters is essential for claiming charitable deductions [8]. - Qualified Charitable Distributions (QCDs): For retirees, QCDs can satisfy required minimum distributions while lowering adjusted gross income [10]. Investment Review - Capital Gains and Losses: Reviewing investment portfolios before year-end allows for strategic rebalancing and tax planning, including harvesting losses to offset gains [9][11]. - Long-term Capital Gains Tax Rates: These are still taxed at 0%, 15%, or 20% for 2025, with high earners potentially facing an additional 3.8% net investment income tax [9]. Deductions and Credits Organization - Organizing Deductions: Proper organization can reveal overlooked deductions and simplify the filing process [10][12]. - Bunching Charitable Contributions: This strategy can help exceed the standard deduction threshold, allowing for itemization and maximizing tax benefits [10]. Self-Employment Considerations - Estimated Payments for Self-Employment: Freelancers and contractors should ensure they make estimated payments to avoid penalties [17]. - Retirement Options for Self-Employed: SEP IRAs and solo 401(k)s allow business owners to contribute a percentage of earnings, reducing taxable income [17]. State and Local Tax Planning - State Tax Considerations: Understanding state-specific tax rules and deadlines is essential to avoid penalties and maximize deductions [16][19]. - SALT Cap Awareness: The federal deduction for state and local taxes has increased from $10,000 to $40,000 under recent legislation [18]. Professional Assistance - Seeking Professional Help: When financial situations become complex, consulting with a tax professional can optimize tax planning and ensure compliance with regulations [20][22].