As 2025 draws to a close, it’s the perfect time to start preparing for tax season. Too often, people reach April 15th only to face an unexpected tax bill or realize they missed opportunities to save. Pure’s Tax Planner, Frank Haney, CPA, shares smart year-end strategies designed to help you minimize your tax liability and set a strong foundation for long-term financial success.
Transcript
Have you thought about filing your taxes yet? You may be saying, “That’s odd — taxes are due April 15th. Why would I need to worry about that now?” Many people get to April 15th and are surprised by a large tax bill or told they missed out on crucial opportunities. As 2025 ends, now is the time to act to affect that tax return. I’m going to cover a few actions you can take before the end of the year to help you come Tax Day.
The main strategy I will touch on is grouping. Grouping is a major tenet of tax planning and revolves around the consolidation of income and expenses into one year. Basically, you use deductions when you’re at your highest marginal tax rate or adding income when your rate is low.
To start with deductions, most grouping strategies apply to itemized deductions. The four primary itemized deductions are: state and local taxes, charitable donations, mortgage interest, and medical expenses.
Due to the passing of the One Big Beautiful Bill Act (or OBBA) in July, the $10,000 limit on the state and local tax deduction was increased to $40,000 for those with less than half a million in adjusted gross income (AGI). Therefore, many people in high-tax states may choose to itemize in 2025 when they didn’t in 2024.
The main way people consolidate their deductions is by doubling up. Here’s an example, a person receives a large bonus from their employer, pushing them into a higher marginal tax bracket. They’re concerned about their tax bill and already take itemized deductions. The taxpayer plans to donate annually to their local non-profit. A grouping strategy suggests they double up on their donation in 2025. This is a win-win: the non-profit gets the donation sooner, and the taxpayer is more efficient — the deduction saves them more tax in 2025 than it would in 2026. This is the basic idea behind grouping, and there are countless ways to implement it.
You can even group unlike deductions. If you’re itemizing, you’ll see savings on additional deductions. For example, if you have high annual medical expenses, your charitable donation will yield a greater tax benefits due to the increased total deductions.
Loss harvesting is another grouping tactic. If you have large capital gains from the sale of property or a business, selling traditional investments at a loss can help offset those gains.
For many newly retired taxpayers whose income has dropped but deductions have not, adding income can offer long-term advantages. For example, intentionally realizing capital gains to diversify your qualified investment accounts can set you up to better achieve your retirement goals.
Another income grouping strategy is a Roth conversion — converting funds from a traditional IRA to a Roth IRA is often a good idea in years with low tax rates. You pay tax at a lower rate now, and in exchange, the converted funds can be withdrawn tax-free, when needed.
If grouping income and deductions isn’t a good fit for your tax situation, there are still other strategies you can implement before year-end.
For those with access to an employer-sponsored retirement plan, maximizing your pre-tax contributions can reduce your taxable income. If you’ve already maxed out your contributions, some plans allow for additional non-deductible contributions, which can then be rolled into a Roth account for tax-free growth. Check with your employer for eligibility.
For taxpayers who don’t itemize but are subject to required minimum distributions (RMDs), a qualified charitable distribution (QCD) can be made directly from the retirement account. A QCD must be made to a qualified non-profit organization. This generates an above-the-line deduction and can help you qualify for AGI-related benefits like the new senior deduction.
As the year draws to a close, it’s the perfect time to take control of your tax situation and avoid any surprises come April. By acting now, you can implement powerful strategies to make the most of your current tax bracket and maximize savings. Please reach out to your Pure advisor or schedule a free tax analysis to see if these strategies are right for you.
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IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period.
