Top Year End Tax Strategies to Reduce Your 2025 Tax Bill

As the year comes to a close everyone’s favorite season is approaching.

Yes you guessed it, tax season!

Before tax season arrives I want to share six simple and practical strategies you can use to reduce your 2025 tax bill while there is still time. These are steps many taxpayers overlook, but with a little planning you can put real money back in your pocket.

Year End Tax Strategies for Everyone

1. Max out your HSA.

An HSA remains one of the most powerful tax tools available because it offers a triple tax advantage. You receive a tax deduction for contributing. Your money can grow tax free. Withdrawals used for qualified medical expenses are also tax free. If you have a high deductible health plan and qualify, contributing the maximum amount for 2025 is an easy way to lower your tax bill and save for future healthcare expenses.

2. Contribute to a Traditional IRA.

Rather than paying higher taxes you can direct money into your retirement savings. A Traditional IRA contribution may be deductible up to $7,000 in 2025 or $8,000 if you are age fifty or older. If you or your spouse have a retirement plan at work the deduction may be reduced or phased out, so be sure to check your income limits.

3. Maximize real estate and rental property deductions.

If you purchased rental property or already own a rental, now is the perfect time to review your expenses and depreciation strategy. Accelerated depreciation or a cost segregation study may significantly reduce your taxable rental income. With strategic planning real estate losses may even offset W two wages or business income depending on your situation. A quick consultation with a tax professional can help you understand your full options.

Business Owner Year End Strategies

4. Use a SEP IRA or Solo 401(k).

Business owners have powerful retirement planning opportunities that can double as major tax savings. A SEP IRA or Solo 401(k) allows you to contribute up to $70,000 in 2025 depending on your compensation or net self employment income. If you qualify this can be one of the fastest ways to reduce your taxable income before year end.

5. Shift income or expenses if you use cash basis accounting.

Cash basis businesses are taxed when money enters your bank account and when you swipe your business credit card. This creates a valuable timing opportunity. You may delay invoicing until January or prepay certain expenses in December. This can shift taxable income into the next year and help lower your 2025 tax burden.

6. Hire your children and pay them bona fide wages.

Hiring your children is a legitimate and effective tax strategy if done correctly. They must perform real work and you must document their tasks and hours. Payments should come from your business bank account and go into their personal bank account. When done properly their wages become a deductible business expense. Your child may earn up to the standard deduction amount and owe little or no federal income tax which can be up to $15,750 per child in 2025. Meanwhile your business reduces taxable income.

Moral of the Story

You do not have to give extra money to the IRS. With the right year end planning you can redirect funds into retirement accounts, investments, or real estate. The tax code rewards individuals and business owners who prepare early and take advantage of the incentives available to them. Many of these strategies must be set up before December thirty first which is why now is the best time to act.

If you have questions or want to explore how these strategies apply to your situation, reach out to Wiggs CPA Tax and Accounting. We are here to help!

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