Year-End Tax and Financial Planning Strategies for 2025

As we approach the end of 2025, it’s time to review key tax and financial planning opportunities before the year comes to a close. This year’s planning is particularly important due to changes introduced by the One Big Beautiful Bill Act (OBBBA), which reshapes deductions, estate tax thresholds, and several retirement planning provisions. Below are some important areas to consider as you prepare for year-end.

Portfolio Considerations

After several strong years for both stocks and bonds, many portfolios have drifted away from their target allocations. Now is a good time to reassess your risk tolerance and ensure your investments remain aligned with your long-term goals.

Don’t let recency bias—the tendency to assume recent trends will continue—keep you from making prudent adjustments. Rebalancing can help lock in gains, control risk, and serve as a simple way to protect your progress and stay on course for what matters most to you.

Charitable Giving

The OBBBA made notable changes to charitable deduction rules:

• Beginning in 2026, itemized charitable deductions are only available for contributions that exceed 0.5% of adjusted gross income (AGI). This means donations made in 2025 may provide a slightly larger tax benefit.

• Standard deduction filers can now claim a charitable deduction of $1,000 (single) or $2,000 (joint).
• Remember that charitable giving is often more advantageous when funded with appreciated investments, as this allows you to avoid capital gains tax while receiving a full charitable deduction.
• Another effective strategy is to make Qualified Charitable Distributions (QCDs) directly from an IRA. QCDs can begin as early as age 70½ and reduce taxable income once an individual is subject to Required Minimum Distributions (RMDs).

Tax Gain and Loss Harvesting

With markets near all-time highs, tax-loss harvesting opportunities may be limited this year. However, investors in lower tax brackets can still benefit from tax-gain harvesting—selling appreciated securities to take advantage of the 0% long-term capital gains bracket.

For 2025, married couples can realize long-term capital gains at the 0% rate until gross income exceeds at least $126,700. This strategy resets your cost basis higher, potentially reducing taxes on future sales.  

Roth Conversions

The OBBBA’s “permanent” extension of current tax cuts beyond 2025 reduces some urgency to accelerate Roth conversions, but the opportunity remains valuable in the right circumstances. Roth conversions tend to be most beneficial in lower-income years—for example, after retirement but before Social Security and RMDs begin. They can also make sense during a career transition, business startup, or any year with significant deductions (including charitable) or losses.

Keep in mind that the benefits of a Roth conversion can go beyond the pure tax savings from comparing current versus future tax rates on IRA or 401(k) distributions. By paying the conversion taxes with non-IRA funds and allocating higher-growth investments within the Roth IRA, you can make the most of its tax-free growth potential. There’s also additional value in the fact that Roth IRAs are not subject to Required Minimum Distributions (RMDs) during the owner’s lifetime. Taken together, these factors make Roth conversions a versatile tool for improving tax diversification and long-term retirement flexibility.

Annual Gifting and Estate Planning

Starting in 2026, the federal estate tax exemption rises to $15 million per individual ($30 million per couple), indexed for inflation. While this reduces exposure for many families, state estate or inheritance taxes remain a concern in several states, including Washington, Oregon, Massachusetts, Minnesota, Illinois, Maryland, New York, and Hawaii.

Even when estate taxes aren’t a factor, lifetime gifting can be a meaningful strategy. Making smaller, intentional gifts during your lifetime allows you to observe how heirs handle funds and provides financial help when it’s often needed most—earlier in life, during career and family-building years. Think of this as a “test drive” of your legacy—an opportunity to confirm that loved ones have the financial maturity and stewardship you hope for before receiving larger inheritances.

Final Thoughts

The close of the year is an ideal time to pause and make sure your financial plan still reflects what matters most to you. From rebalancing your portfolio to maximizing charitable giving or exploring Roth conversion opportunities, small steps taken before December 31 can position you for continued financial success. Your future self — and your loved ones — will thank you.