CREATE A YEAR-END TAX PLAN—AND SAVE YOURSELF FROM AN APRIL 15 SURPRISE—WITH THESE FIVE TIPS
We’re staring down the road of the end of 2025, friends.
Maybe, like us, you’re wondering where the heck the year went. Though we’re scratching our heads at the quick passage of time, we are certain about one thing: You can finish the year strong, financially, with these five tips from our Alia team.
Let’s get started, as it’s already early November.
CONSIDER MAXING OUT YOUR 401(k)
Contributions to a traditional 401(k) are made with pretax dollars, meaning they come off the top of your check, which reduces your gross income for the year.
Bonus: This could put you into a lower tax bracket, increasing your tax savings. If you’re a high-income earner, a substantial year-end contribution to your 401(k) could prevent some of your income from being taxed at the highest rates.
Additionally, your investments in your 401(k) and their earnings grow tax-deferred, meaning you do not pay taxes on them annually. You only pay taxes when you withdraw the money in retirement, at which point you may be in a lower tax bracket.
For 2025, the standard employee 401(k) contribution limit is $23,500.
If you are age 50 or over: You can contribute an additional $7,500 in catch-up contributions, for a total of $31,000.
Age 60 to 63: You can use special “super-catch-up contributions” of up to $11,250, for a maximum annual contribution of $34,750, to maximize tax savings.
Think It Through: Check your retirement plan’s rules before going this route. Some employers provide matching contributions on a per-paycheck basis. If you “front-load” and max out your contributions early in the year, you might miss out on matching funds in later pay periods. However, some plans have a “true-up” feature that ensures you still receive the full annual match.
MAKE SURE YOU’RE CAUGHT UP WITH YOUR QUARTERLY ESTIMATED PAYMENTS
If not, you may be charged an underpayment penalty.
The U.S. tax system operates on a “pay-as-you-go” basis, which means you pay income tax as you earn or receive income throughout the year, rather than in a single lump sum at the end. If you work for an employer, you likely pay as you go through tax withholding (where your employer automatically deducts a portion of your wages).
However, if the income you receive throughout the year isn’t taxed (or automatically deducted by your employer) than you must make estimated tax payments to meet your obligations before the annual tax filing deadline.
This method is used to pay tax on income that is not subject to withholding, such as:
Self-employment earnings
Gig or side-hustle income
Interest
Dividends
Capital gains
Alimony
If you are any of the above and make quarterly estimated payments, the IRS provides several tools to help you determine what you owe and when, as well as an online portal where you can view your payment history.
Also consult with a CPA, who can and often does handle estimated quarterly taxes for clients. This is a standard service, particularly for self-employed individuals, small-business owners and others with income not subject to typical W-2 withholding.
STAY ON TOP OF YOUR ACCOUNTS, INCLUDING DIVIDENDS AND CAPITAL GAINS
The best advice is to check them throughout the year. If that just hasn’t happened, check them at least at the end of this year to avoid a tax surprise on April 15.
That’s because dividends and realized capital gains (from selling investments for a profit) can trigger tax liabilities. A realized capital gain occurs when an asset is sold, making it a taxable event that must be reported on a tax return. The gain is classified as either short term or long term.
By keeping track of both gains and losses, you can perform “tax-loss harvesting,” if necessary. This strategy reduces capital gains taxes owed from selling profitable investments and reduces your tax liability.
Tip: Alia clients, we make it easy to monitor your accounts. Simply click CLIENT LOGINS at the upper-right corner of the website and go straight to your accounts.
ENSURE YOUR CHARITABLE GIVING BENEFITS YOU TOO
Making a charitable donation at the end of the year not only supports the causes you care about, but it could also lower your tax bill if you itemize deductions.
December is the peak month for charitable giving, with over 30% of annual charitable donations occurring this month alone. Plan your charitable giving now to maximize your tax benefits and ensure your donations align with your philanthropic goals.
Important considerations when planning:
Your donations must be made by December 31 to qualify for the current tax year.
If your itemized deductions are close to the standard deduction, “bunching,” or consolidating several years’ worth of charitable donations into a single year, may be advantageous—and help maximize your charitable income tax deductions.
A donor advised fund, or DAF, is an ideal vehicle for a bunching strategy, because you can make those contributions to your DAF during one tax year, while distributing grants to your favorite nonprofits according to your own schedule. In addition, the assets in your DAF can be invested to potentially grow and increase your impact.
By donating appreciated stock held for more than one year to a qualified public charity, you can claim a deduction for the fair market value and avoid paying capital gains tax on the appreciation.
If you’re age 70 1/2 or older, you can donate up to $108,000 from an IRA directly to a charity to help make your required minimum distribution more tax efficient. You won’t be able to take the charitable deduction for the donation, but you’ll reduce your taxable income for the year by the amount of the donation.
FINALLY, REVIEW YOUR HSA/FSA ACCOUNTS
It’s important to review both your Health Savings Account (HSA) and/or Flexible Spending Account (FSA) at year-end. Otherwise, you could be leaving money on the table that could help offset medical expenses today and serve as a valuable retirement investment tool in the future.
Health Savings Account (HSA)
An HSA is a tax-advantaged savings account for people with a high-deductible health plan (HDHP) to pay for qualified medical expenses.
These accounts are considered a triple tax advantage—and a powerful retirement savings tool—because:
contributions are pre-tax
the money can grow tax-free
withdrawals for eligible medical costs are also tax-free
Plus, any money left over rolls over each year, can be invested, and is portable if you change jobs.
For a long-term strategy, consider paying for current medical expenses with other funds and letting your HSA grow tax-free. Keeping receipts allows for tax-free reimbursement later. After age 65, withdrawals are penalty-free, though non-medical withdrawals are taxed. If available, investing HSA funds can maximize tax-free growth. Remember to confirm any employer contributions, as they count toward your limit.
Flexible Savings Account (FSA)
An FSA is an employer-provided, pretax account that allows people to set aside money for out-of-pocket healthcare or dependent-care expenses. Funds are deducted from your paycheck before taxes, reducing your taxable income and saving you money on taxes.
As the year ends, review your FSA to avoid forfeiting unused funds, as most FSAs follow a “use-it-or-lose-it” rule. Additionally, check your plan’s specific deadlines and rules, confirm your remaining balance and plan how to use or claim any leftover money.
Does all this information have your head spinning?
That’s why we’re here.
At Alia, our priority is to provide knowledgeable guidance to pursue your financial dreams and goals. This includes smart year-end tax-saving strategies. Contact us today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.
Disclosure: Content in this material is for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. All investments involves risk including loss of principal. No strategy assures success or protects against loss.
