Clever Year-End Financial Moves
- Stephen H Akin
- Oct 18
- 4 min read
Updated: 4 days ago
Before 2025 ends, taking proactive tax and financial steps can significantly reduce your tax burden and strengthen your long-term financial health. The most effective year-end strategies focus on retirement contributions, charitable giving, investment management, and optimizing income and deductions.
Maximize Retirement Contributions
Contributing the maximum allowed amounts to tax-advantaged accounts like a 401(k) or IRA can lower your taxable income and grow your savings tax-deferred.
The 2025 limits are $23,500 for 401(k) plans, with additional catch-up contributions of $7,500 for those over 50, and $11,250 for those aged 60–63.
For IRAs, the limit is $7,000, plus $1,000 more if age 50 or older.
Consider Roth Conversions
If you find yourself in a lower tax bracket for 2025, converting traditional IRA or 401(k) funds into a Roth IRA could be advantageous. You’ll pay taxes on the converted amount now, potentially at a lower rate, and future withdrawals will be tax-free.
You may not be in a position to convert to a Roth IRA, but that doesn’t mean you’re off the hook when it comes to tax strategies, especially if you contribute to a company sponsored 401(k) plan. “As year-end approaches it’s important to be sure that you’ve met the maximum allowable contributions to your retirement plans,” says Stephen H. Akin of Akin Investments, LLC.
Use Required Minimum Distributions and Charitable Giving
For individuals 73 or older, required minimum distributions (RMDs) must be taken by year-end to avoid penalties. Alternatively, up to $108,000 in 2025 can be donated directly from an IRA to qualified charities through a Qualified Charitable Distribution (QCD), keeping your taxable income lower.
Engage in Strategic Charitable Giving
The current 2025 tax year allows deductions of up to 60% of AGI for cash gifts and 30% for appreciated assets. With changes coming in 2026, it may be wise to accelerate charitable giving now. Using donor-advised funds can also provide immediate deductions and long-term flexibility.
Donate Appreciated Assets or Use Donor-Advised Funds
Donating appreciated securities held for more than one year allows you to deduct the fair market value while avoiding capital gains taxes on appreciation. Contributing to a donor-advised fund (DAF) offers the same benefit and flexibility to distribute gifts later. Non-itemizers may also claim a new above-the-line deduction ($1,000 single, $2,000 married) for 2025 charitable gifts.
Stocks Make Great Christmas Gifts
“If you want to transfer a stock you don’t already own, you’ll need to purchase it in your account before you transfer it to someone else,” adds Stephen Akin, registered investment advisor at Akin Investments.
Another way to gift stock is to set up a custodial account, sometimes referred to as an UGMA/UTMA account in reference to the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, which is intended for children under age 18. There are no contribution limits, though accounts must be funded with after-tax dollars. This is a way to create generational wealth because the child will eventually get full control of the account when they’re an adult (exact age varies by state, but is usually between 18 and 21).
Review Your Investment Portfolio
Rebalance your portfolio to align with your goals and risk tolerance. Employ tax-loss harvesting by selling losing investments to offset gains and reduce taxable income by up to $3,000.
Tax-Loss Harvesting
One of the most effective year-end tax maneuvers is selling underperforming investments to offset realized gains. Capital losses can offset capital gains dollar-for-dollar, and any excess up to 3,000 USD (1,500 USD if married filing separately) can offset ordinary income. Unused losses can carry forward into future years. To avoid disqualification under the wash-sale rule, do not repurchase the same or a “substantially identical” security within 30 days before or after selling it.
Defer or Accelerate Income Strategically
If you expect to be in a lower tax bracket next year, defer income or bonuses into 2026. But if higher rates are anticipated, consider accelerating income into 2025 to lock in current rates.
Exercising non-qualified stock options
Exercising non-qualified stock options (NQSOs) late in 2025 has specific and potentially significant tax consequences. These depend on when you exercise, whether you sell the shares immediately, and your income level. Because exercises are considered taxable income events, the timing near year-end directly affects your 2025 tax return.
Ordinary Income and Payroll Taxes at Exercise
When you exercise NQSOs, the bargain element—the difference between the fair market value (FMV) at exercise and your strike (exercise) price—is taxed as ordinary income in the year of exercise, regardless of whether you sell the shares.
This income is subject to federal, state, and local taxes, as well as FICA (Social Security and Medicare).
Employers typically withhold 22% for federal taxes (or 37% for income above $1 million), in addition to Medicare tax of 1.45% and, if applicable, 0.9% additional Medicare tax for high earners.
Example: If you exercise 10,000 options with a $20 strike when the stock trades at $50, your taxable ordinary income is (50 − 20) × 10,000 = $300,000, added to 2025 wages for tax purposes.
Spend Down Flexible Spending Accounts
For employer-provided FSAs, use remaining funds by December 31 to avoid forfeiting unspent amounts on eligible health or dependent care expenses.
Optimize Health and Benefit Elections
Review health savings account (HSA) contributions, insurance coverages, and open enrollment elections to maximize pre-tax benefits for 2026.
In summary, the best year-end financial moves combine tax efficiency with long-term planning — maximizing retirement accounts, strategically donating, harvesting investment losses, and managing income timing to secure the lowest possible tax liability for 2025.
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