Year End Tax Planning 2025: Essential Dos and Don’ts

As 2025 draws to a close, a thoughtful year‑end tax plan can help you keep more of what you’ve earned, avoid penalties, and position your household for a smoother filing season. This guide distills practical “Dos and Don’ts,” explains common pitfalls, and offers a checklist you can implement before December 31.

Why Year End Planning Matters

Year‑end is when the window closes on many strategies that can meaningfully influence your tax outcome—Required Minimum Distributions (RMDs), charitable gifts, tax‑loss harvesting, retirement contributions, and timing decisions that can affect Medicare premiums. Once the calendar flips, options narrow and your flexibility declines. Acting now provides two benefits: (1) it can reduce or smooth your tax bill, and (2) it decreases stress during filing season by ensuring documentation and decisions are already in place.

The Essential Dos

Do take RMDs if you’re age 73 or older.
If you’ve reached RMD age, you must withdraw the minimum from tax deferred accounts such as traditional IRAs, SEP IRAs, SIMPLE IRAs, and most 401(k)s. Missing an RMD triggers a steep penalty on the amount you should have taken. Build a habit of scheduling RMDs early each December, leaving time to resolve any transfer issues.^[1]

Do consider Qualified Charitable Distributions (QCDs).
For eligible IRA owners, a QCD allows you to send funds directly from your IRA to qualified charities. This can satisfy some or all of your RMD and may reduce your taxable income. QCDs are especially helpful if you don’t itemize deductions but still want tax‑efficient giving. Remember that processing times can take days, so start early and confirm charities are eligible.^[2]

Do complete charitable gifts before December 31.
Whether you donate cash, appreciated stock, or use a donor‑advised fund, timing matters. Many custodians require extra processing time for in‑kind stock gifts, so place those requests well before the last week of December. Keep contemporaneous receipts and acknowledgment letters for substantiation.

Do adjust withholding or make estimated payments if income changed.
If your income jumped in 2025—bonuses, equity comp, business profits, capital gains—review whether your withholding or quarterly estimates are sufficient. Underpayments can trigger penalties. A quick projection now helps you top off payments and avoid surprises.

Do practice proactive tax‑loss harvesting.
Scan your taxable portfolio for positions trading below cost basis. Realizing losses can offset realized gains this year, and unused losses can carry forward to future years. Pair any sales with a suitable “like‑minded” replacement to maintain your market exposure, while avoiding wash‑sale rules. Many investors set a target date each December to complete harvesting and rebalance.

The Don’ts (and Why They Matter)

Don’t wait until the last minute.
Rushing increases errors and narrows your options. Transfer delays, custodian cut‑offs, and holiday schedules can derail well‑intentioned plans. Aim to finalize most year‑end actions by mid‑December.

Don’t overlook documentation.
Missing receipts or acknowledgment letters can result in disallowed deductions. Maintain a simple folder or digital drive for 2025 tax documents: charitable acknowledgments, medical receipts, education expenses, and property tax confirmations.

Don’t ignore bracket management and Medicare thresholds.
Income decisions—Roth conversions, capital gains, bonuses—can push you across tax brackets or Medicare’s Income‑Related Monthly Adjustment Amount (IRMAA) thresholds. Even one dollar over a threshold can increase Part B premiums in the next evaluation. If you’re close to a bracket edge, coordinate timing with your advisor to avoid an unintended spike.

Special Considerations for 2025 Filers

RMD and inherited IRA rules.
The RMD age is 73, and the rules for inherited IRAs require many non‑spouse beneficiaries to take annual distributions and fully empty accounts within 10 years of the original owner’s death. If the original owner was already taking RMDs, beneficiaries generally must take RMDs in years 1–9 of the 10‑year period. Clarify your status and distribution schedule now so you don’t miss a required payout.^[3]

Retirement contributions and catch‑ups.
Contribution limits adjust for inflation, and age‑based catch‑ups can meaningfully reduce taxable wages. For those 50 and over, ensure you’ve maximized available pre‑tax deferrals in employer plans. If you’ve crossed income thresholds that require Roth catch‑up contributions, plan for the tax effect while continuing to build retirement capital.

A Practical Year‑End Checklist

1. RMDs: Confirm amounts, account sources, and distribution timing.

2. QCDs: If eligible, coordinate IRA‑to‑charity transfers and obtain acknowledgments.

3. Charitable Gifts: Complete cash and stock gifts early; capture all receipts.

4. Withholding/Estimates: Run a year‑end projection; top off payments to avoid penalties.

5. Portfolio Review: Implement tax‑loss harvesting; rebalance as needed.

6. Retirement Contributions: Max out 401(k)/403(b) deferrals; verify catch‑up rules.

7. Medicare/Income-Related Monthly Adjustment Amount Awareness: If near thresholds, time income events carefully.

8. Documentation: Organize 2025 tax files in a single, searchable location.

9. State and Local Tax (SALT) deduction Payments: If you plan to itemize and qualify under income limits, consider timing property or state estimated tax payments to optimize deductions.

10. Advisor Coordination: Schedule a short meeting to confirm priorities and execute.

Common Pitfalls to Avoid

• Assuming custodians will process at year‑end without delays. Holidays and high volumes can push transfers into January.
• Forgetting to coordinate spousal planning. Filing jointly means decisions affect household brackets, credits, and deductions.
• Over‑concentrating on taxes at the expense of portfolio risk. Tax moves should align with long‑term investment policy.
• Neglecting beneficiary designations. Review retirement accounts and insurance policies annually to ensure they reflect current intentions.
  

Bringing It All Together

Year‑end planning is about deliberate, timely action. By following the Dos and avoiding the Don’ts, you protect against penalties, create tax‑efficient giving strategies, and keep your retirement contributions on track. The payoff is a calmer, more controlled filing season and a stronger financial foundation going into 2026.

Need help prioritizing the steps that fit your situation? OnePoint BFG’s advisors can help.