Americans busy with shopping and trimming trees may want to set those chores for the last week of the year and focus on a frequently overlooked but financially critical household task: locking down tax savings before the 2025 tax year closes.
“Year-end is a critical period for taxpayers as it provides a global overview of the previous year’s liability and the upcoming year's potential liability,” Evan Paul, founder at Paul Advisory & Legal Group, told NTD News.
Paul believes that the overview should include a comprehensive view of total income, deductions, and tax liabilities for the prior year, enabling individuals and families to evaluate whether their current trust structures, entity frameworks, and planning strategies are optimized.
“This period is essential for identifying opportunities to implement or refine advanced structures that maximize available tax advantages before year-end closes,” he noted.
Big Ticket Item Write-Offs
Some of the most effective year-end tax strategies involve accelerated expensing and large-ticket asset acquisitions.“Significant purchases such as luxury vehicles can generate substantial deductions when properly structured under applicable bonus-depreciation and Section 179 rules,” Paul said.
Load Up on Retirement Plan Tax Savings
One particularly effective year-end tax move is available to most people and relatively easy to execute.Leverage Tax Loss Harvesting
Most Americans have some investment in U.S. stock markets or other tradable assets.“If those assets are trading at a loss, you can harvest those losses to deduct up to $3,000 of capital losses on the tax return,” Joel Salas, tax expert at JustAnswer, told NTD.
Make Required Minimum Retirement Plan Withdrawals Before Jan. 1
Retirees should make required minimum distributions or use special strategies before year-end.“Retirees are required to take required minimum distributions, which can often trigger significant penalties,” Salas said.
Give Loved Ones a Tax-Free Gift and Enjoy the Tax Benefits
Americans can gift up to $19,000 ($38,000 for married couples) per individual to an unlimited number of family or friends, and save cash on your lifetime estate and gift tax exemption.Don’t Procrastinate
By far the biggest tax mistake people make is waiting until it's too late, Salas noted.“If you’re waiting until the very last week of the year, keep in mind that the entities (think tax experts, banks, and financial advisors) that we're interacting with may not have time to help out,” he said. “We're at a time when there are several holidays that are causing businesses to close.”
For example, if you're trying to make a large 401(k) contribution on Dec. 30 or Dec. 31, and the bank is not open, “the contribution won't process until the following calendar year, which doesn't help you this year,” Salas said. “It's a scenario I see way too often.”