Year-End Tax Planning Guide for Individuals
Key Points
- Year-end tax planning in 2025 focuses on maximizing deductions and leveraging new benefits introduced by the One Big Beautiful Bill Act (OBBB).
- Strategic gifting, charitable giving, and retirement contributions can significantly reduce taxable income before December 31.
- Updated thresholds for estate, retirement, and health savings accounts create key opportunities for individuals to optimize 2025 tax outcomes.
As the end of 2025 approaches, now is the time to review your personal tax strategies. With updated IRS thresholds and new opportunities introduced by the One Big Beautiful Bill Act (OBBB), proactive planning can help you reduce your tax burden and position yourself for financial success in 2026.
Key Highlights
Estate Planning
Estate and gift tax thresholds remain at record levels for 2025.
Estate and gift limits for 2025:
- Estate and gift tax exemption: $13.99 million per individual.
- Annual gift tax exclusion: $19,000 per recipient.
Individuals should take advantage of these limits before they potentially change after 2025. Consider gifting appreciated assets or establishing trusts such as Spousal Lifetime Access Trusts (SLATs) or Grantor Retained Annuity Trusts (GRATs) to reduce future estate tax exposure and preserve family wealth.
Charitable Contributions
Charitable giving remains an effective way to reduce taxable income.
- Itemizers can deduct cash contributions up to 60 percent of adjusted gross income (AGI).
- Non-itemizers will see a new limited above-the-line deduction under the OBBB once the IRS releases filing guidance.
- Qualified Charitable Distributions (QCDs) remain a powerful option for taxpayers aged 73 or older, allowing IRA funds to go directly to charity while satisfying required minimum distributions (RMDs) tax-free.
Individual Tax Planning Strategies
Maximize Retirement Contributions
Contributions to retirement accounts can significantly reduce your taxable income. These contributions can lower your taxable income, especially if you are nearing retirement.
401(k), 403(b), and 457 plans:
- Contribution limit for 2025 is $23,500.
- Additional $7,500 catch-up contribution available for those aged 50 and older.
- Individuals aged 60 to 63 can make a higher $11,250 catch-up contribution under SECURE 2.0.
IRA and Roth IRA contributions:
- Contribution limit for 2025 is $7,000.
- Additional $1,000 catch-up contribution for individuals aged 50 and older.
Making these contributions before year-end can reduce your current tax bill and increase future retirement security.
Required Minimum Distributions (RMDs)
The RMD starting age remains 73. If you reached that age this year, ensure your RMD is taken by December 31 or by April 1 of next year if it is your first. Failing to take an RMD can result in substantial penalties.
Health Savings Accounts (HSAs)
Health Savings Accounts remain one of the most tax-efficient savings vehicles available.
HSA limits for 2025:
- Self-only coverage: $4,300.
- Family coverage: $8,550.
Contributions reduce taxable income and can be withdrawn tax-free for qualified medical expenses.
State and Local Taxes (SALT) and Itemization
The OBBB temporarily raises the state and local tax (SALT) deduction cap through 2029.
Key deduction thresholds for 2025:
- Single filers: Standard deduction of $15,000.
- Married filing jointly: Standard deduction of $30,000.
- Head of household: Standard deduction of $22,500.
Compare the itemized deductions, such as mortgage interest, SALT, charitable contributions, and medical expenses, to the standard deduction amounts listed above. Timing charitable or property tax payments before year-end may help exceed these thresholds and maximize your deductions.
2025 Standard Mileage Rates
For 2025, the IRS has established the following mileage deduction rates:
Business mileage: 70 cents per mile.
Medical and moving: 21 cents per mile.
Charitable mileage: 14 cents per mile.
Maintain accurate mileage logs throughout the year to support deductions and reimbursements.
Additional Considerations
- Withholding and estimated taxes: Use the IRS Tax Withholding Estimator to confirm your payments are sufficient for 2025.
- Beneficiary designations: Review and update beneficiaries on retirement accounts and insurance policies.
- Documentation: Keep records for gifts, donations, and medical expenses to streamline tax preparation.
OBBB Impact Overview
For individual taxpayers, the OBBB made the seven income tax brackets permanent and introduced several temporary deductions:
- Above-the-line deductions for tips and overtime pay.
- A temporary interest deduction for U.S.-assembled vehicle loans.
- A higher SALT deduction cap through 2029.
These changes are designed to enhance stability, reward work, and encourage charitable giving. As the IRS issues additional guidance, individuals should coordinate with advisors to capture every available benefit.
Planning for a Confident 2026
Proactive tax planning helps turn updated limits and legislative changes into meaningful savings. By maximizing contributions, coordinating RMDs, and documenting charitable and deductible activities, you will enter 2026 well prepared and with greater financial confidence.
Frequently Asked Questions (FAQ)
- What are the most important year-end tax moves for individuals in 2025?
Focus on maximizing retirement contributions, completing charitable donations, and verifying withholding amounts. These actions help lower your taxable income and position you for a smoother tax season in early 2026. - How does the One Big Beautiful Bill Act (OBBB) affect individual tax planning?
The OBBB introduced new deductions and made key income tax brackets permanent. It also raised the SALT deduction cap and added benefits for overtime and vehicle loan interest, creating opportunities for additional savings. - Should I make gifts before the estate and gift tax exemptions change?
Yes. The current $13.99 million exemption is historically high and may decrease after 2025. Making strategic gifts or establishing trusts now helps secure today’s limits and protect long-term family wealth. - What are the benefits of using a Health Savings Account (HSA) for tax planning?
HSAs offer a triple tax advantage: contributions are deductible, growth is tax-free, and qualified withdrawals are untaxed. They’re especially valuable for individuals with high-deductible health plans who want to manage healthcare costs efficiently.
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