Time Is Running Out to Make the Best Moves to Save on Your 2025 Taxes

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It's not too late to do some clever tax planning for 2025 that will save money on your taxes — but if you wait until January, it will be too late.

When it comes to taxes, the best opportunities come from proactive planning throughout the year, rather than waiting until it's over.

For example, most families who have been saving and investing for some time will generate significant capital gains each year. Long-term capital gains rates can be as high as 20%, while short-term rates can be as high as 37%, depending on your income bracket.

An additional 3.8% tax, the net investment income tax (NIIT), applies to investors above certain income limits. For many, this tax bill can be considerable.

How to employ tax-loss harvesting

These gains can be offset with tax-loss harvesting strategies, which involve strategically selling securities at a loss, creating an offset to that year's capital gains, then replacing them with similar assets.

If the new assets perform similarly to the old ones, your portfolio ends up in a similar place, but through the strategic sale, you now have losses to offset potential gains, resulting in lower taxes. (There is nuance involved, such as complying with wash-sale rules, which should be navigated carefully to maximize the benefit.)

Most tax-loss harvesting is effective when it's opportunistic throughout the year. By January, it's too late to even think about it for the previous year.

If you wait until the end of the year, you might find a few assets in your portfolio that are down, but you'd likely find the most opportunities if you use tax-loss harvesting throughout the year.

Consider the market so far in 2025.

In April, the S&P 500 was briefly down as much as 20%, and a wide range of assets could have been opportunistically sold. But you had to be thinking about it throughout the year to be in a position to take advantage.

If you started thinking about tax losses now, you haven't completely missed opportunities for 2025, but you might have missed the best opportunity of the year.

Maximize your charitable contributions

For investors considering their charitable giving strategies, another opportunity for year-round tax planning is available.

If you have securities that have appreciated in value, you can donate them to a charity at their current fair market value (if they have been held for over a year).

Neither you nor the charity owes capital gains tax on the gift.

A moment of market upswing, which could occur at any point during the year, maximizes both the tax benefit to you and the funds available to your charitable cause.

Now is a good moment for this one.

Consider potential Roth conversions

A third tax-saving strategy to triangulate with your year-round planning would be Roth conversions.

If the deductions from tax-loss harvesting and strategic charitable donations pushed you into a lower tax bracket, you could use this opportunity to convert taxable retirement accounts into after-tax Roth accounts.

The big takeaway here is that there are still opportunities in the final months of 2025 to implement a valuable tax strategy, such as our tax-loss harvesting example above.

There could be even bigger opportunities if you make 2026 the year that you begin year-round tax planning.

Estate planning at the end of the year

In addition to tax strategies within your portfolio, the final months of the year are a valuable window for estate planning.

The annual gift tax limit is $19,000 for an individual and $38,000 for a couple in 2025. No taxes are owed, but the gift opportunity is use-it-or-lose-it.

Some families use the end of the year to take advantage of income-shifting. A family member in a higher tax bracket uses the gift tax limits to donate assets to a family member, perhaps a young adult child, in a much lower tax bracket. Future income from that asset is taxed at the lower rate.

The key takeaway is that if your finances have even a little bit of complexity — capital gains, charitable goals, pretax retirement accounts — there are significant opportunities for tax savings.

As the complexity of your finances grows, so do the opportunities.

For many investors, a key stumbling block is the difficulty of coordinating these strategies among different professionals, a wealth adviser, a tax accountant and an estate planning attorney. That's one reason it often falls by the wayside until it's too late.

Some opportunities fade throughout the year, and most savings opportunities are completely gone by the time the tax-filing deadlines roll around.

Your taxes shouldn't be an exercise in digging up historical documents, but an exercise in active savings. There are still opportunities in 2025 taxes, and even more for 2026.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.