Here Are Some End-of-Year Tax Planning Tips to Consider

Well, folks—it’s the most wonderful time of the year. No, we’re not talking about the holidays, even though Aunt Jeanine’s famous cranberry eggnog soufflé does only come once a year.

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It’s the countdown to tax season! Woo-hoo! Only a few more sleeps until the tax man comes down your chimney looking for his share of the milk and cookie dough you’ve been working hard for all year. (Get it? Cookie dough?)

Seriously, though—Tax Day may not arrive for a few more months, but there are some financial choices you can make before December 31 that could have a huge impact on how much of that dough you’ll owe to the government.

If you’re like most people, a little extra cash could go a long way. So keep the big picture in mind as we go over these end-of-year tax-planning tips—and consider talking to a tax pro about which of these strategies makes sense for you in your situation.

1. Check your paycheck withholding.

Every time you get a paycheck, your employer withholds taxes to send to the IRS. When tax time rolls around, that’s when you find out if you had too much or not enough taxes withheld from your paycheck.

Withheld too much? You’ll get a tax refund. Withheld too little? You’ll have to cut a check to the IRS. No thanks!

If your tax bill last year almost gave you a heart attack because you didn’t withhold enough money each payday, you might want to go ahead and make some adjustments before December 31.¹

 

We recommend adjusting your tax withholding to get as close to zero as possible. That would mean you owe nothing on Tax Day and won’t get a “refund” either (which is a good thing—that money was yours to begin with!). You want your money working for you, especially if you’re kicking debt to the curb and building wealth with Ramsey’s 7 Baby Steps!

2. Defer your income.

Did you know some jobs allow you to defer your income? That means you can earn money now but choose to get paid later—maybe next year or perhaps much later, once you’re in retirement. Why? Because you might be in a lower tax bracket in the future, which could reduce how much you owe in taxes.

Income is taxed the year you receive it, so if you’re able to defer any income until January 1 or later, your tax bill for this year’s income will be lower. Now, maybe you’re thinking, How am I supposed to postpone my salary for a whole month just to save a little on taxes? Fair question. We’re not suggesting you do that—we just want you to think outside the box a little. Most people aren’t in a position to go without their base income for the month of December. But you may be able to at least defer a year-end bonus into next year, if your employer allows it.

And if you’re self-employed and looking for more ways to save, consider delaying that invoice. Wait until the end of December to bill your clients. That way, you’ll receive those payments at the beginning of next year.

Deferring your income only makes sense if you expect to be in the same or even a lower tax bracket next year. Before you use this as a year-end tax-savings strategy, consider whether pushing some income from this year into next will bump you into a higher tax bracket in the future.

3. Adjust your retirement account contributions.

One of the simplest ways to save on this year’s taxes is to contribute more to your tax-advantaged retirement accounts, like an employer-sponsored 401(k) or 403(b) or an individual retirement account (IRA).

Traditional 401(k)s and traditional IRAs are funded with pretax dollars, which means you can lower your tax bill this year by writing off your contributions as a tax deduction. Sweet!

But since you’re not paying taxes when you put that money in, you’ll have to pay taxes on it (and its growth) when you take it out in retirement. Who knows what the tax rates and brackets will look like by then? (That’s why we recommend going with Roth 401(k)s and Roth IRAs.)

The IRS usually increases contribution limits for both 401(k)s and IRAs every year to adjust for inflation, and they’re doing it again for 2025 and 2026.³

Contribution Limits

 

Retirement Account	Contribution Type	Tax Year 2025	Tax Year 2026	Change
401(k) Plans	Employee elective deferral (under age 50)	$23,500	$24,500	+$1,000
	Catch-up contribution (age 50+)	$7,500	$8,000	+$500
Traditional & Roth IRAs	Regular contribution (under age 50)	$7,000	$7,500	+$500
	Catch-up contribution (age 50+)	$1,000	$1,100	+$100

 

Now, some people will tell you to max out your contributions every year so you can save as much as possible on taxes. But don’t go jumping on that bandwagon just yet. There’s a time and a place for everything—and that applies to maxing out your 401(k) too.

Here’s the deal: If you decide to max out your 401(k), you’re making a choice to park that money until you retire. Because if you take money out before age 59 1/2, you’ll have to pay early withdrawal penalties and any taxes you owe on the money you take out.⁴ Your 401(k) is your nest egg, not a piggy bank!  

That’s why we recommend you follow the Baby Steps so you’re investing the right amount at the right time.

Baby Steps 1–3 set the foundation for investing because you focus first on getting out of debt and saving up a fully funded emergency fund. Once you reach Baby Step 4, you’ll begin investing 15% of your income for retirement—because you need to keep some room in your budget for other important financial goals, like saving for your kids’ college funds (Baby Step 5) and paying off your house early (Baby Step 6).

Once there’s enough money set aside for Junior’s college education and you send your last mortgage payment to the bank, then you can start thinking about maxing out your 401(k) (Baby Step 7).

4. Take RMDs from traditional retirement accounts (if you’re 73 or older).

Don’t forget to take your RMDs! Sounds like some kind of terrible medication, doesn’t it? Well, that’s not far from the truth, unfortunately.

The IRS sets a deadline for required minimum distributions (RMDs) on traditional IRAs, SEP-IRAs, 401(k)s, 403(b)s and SIMPLE IRAs.⁵ If you’re 73 or older and you don’t take your RMDs by the end of the year, you could face some steep penalties.

The minimum you must withdraw each year depends on two things: your account balance on December 31 of the previous year and your IRS “life expectancy factor.” ⁶ 

So, if you’re 73 or older and either miss the RMD deadline (December 31) or don’t withdraw enough, that mistake could cost you. Better set a reminder!

5. Use your gift tax exclusion.

The gift tax may sound like a Christmas wish list nightmare, but Santa has nothing to do with it (at least we hope he doesn’t). The gift tax is Uncle Sam’s way of taxing the transfer of money or property (think stocks, vehicles or land) from person to person. As Charlie Brown would say, “Good grief!”

But if you stay within IRS limits, you, as the giver, won’t have to pay taxes on the gift (the IRS will take its cut from the recipient when they report it).

So, what are those limits? For 2025 and 2026, the annual gift tax exclusion is $19,000 per person, per recipient. For married couples, the limit is $19,000 each, for a total of $38,000.^7,8 But hang in there because this is where it gets complicated. If you exceed the gift tax exclusion amount, you may have to file a gift tax return and some of your gift could be subtracted from your lifetime gift exclusion.

That’s right—you get the $19,000 annual gift tax exclusion for 2025 as well as a $13.99 million lifetime exclusion. When you give away more than the annual gift tax exclusion limit, that excess “spills over” into your lifetime gift exclusion limit.⁹

Here’s an example. Let’s say a married couple has four grandkids and they want to give each one a gift of $50,000 to help them save for college. If they give that money to the grandkids this year, they’ll use up their $38,000 annual exclusion limit for married couples. But they probably won’t have to pay taxes on these gifts because the extra $48,000 ($200,000 - $152,000) gets subtracted from their lifetime exclusion limit. The takeaway? As long as that excess doesn’t continue piling up year after year and exceed $13.99 million, you shouldn’t have to worry about paying taxes on your gifts.

 

6. Set yourself up to take advantage of tax deductions and credits.

It’s not too late to take advantage of as many tax deductions as possible. A few of these moves require you to make payments now (that you’d have to make in January anyway) to save money on Tax Day. If you want in, you need to get the ball rolling—so let’s cover some details.

 

Tax Strategies

 

Strategy	Tax Benefit Type	Key Details
Pay your property tax bill early	Deduction (itemized)	State and local taxes (SALT) are deductible, but only if you itemize 11
Pay your January mortgage bill early	Deduction (itemized)	Mortgage interest is deductible, but only if you itemize 12
Make any last-minute charitable contributions	Deduction (itemized)	Contributions must be made to qualified charities and are only deductible if you itemize 13
Finish your energy-efficient home upgrades	Credit (nonrefundable)	The RCEC and EEHIC offer credits up to 30% for improvements installed before December 31, 2025 14

 

Pay your property tax bill early.

If you own a home or rental property, your estimated property taxes are probably included in your monthly mortgage payments.

But if you don’t have a mortgage or don’t pay your property taxes with your mortgage payment, you can reduce your taxable income by paying your property tax in full for the year by December 31. That way, you can write off your property taxes when you file your return.

Here’s a list of property types that are often tax-deductible:

• Primary home
• Qualified co-op apartments
• Vacation homes
• Land ^15,16

To write off your property taxes, you’ll have to itemize your deductions—and the only way that’s worth it is if you would save more by itemizing than you would by taking the standard deduction.

That standard deduction, by the way, is $15,750 for single filers and $31,500 for married couples filing jointly for 2025. Looking ahead to 2026, those numbers will increase to $16,100 for single filers and $32,200 for married couples filing jointly.¹⁷

As the IRS continues to increase these numbers year after year, more people will come out on top by simply taking the standard deduction instead of going through the hassle of itemizing.

Pay your January mortgage bill early.

If you’re a homeowner thinking about deducting your property taxes, don’t forget your mortgage interest deduction too.

If you bought your primary home (or a second home) before December 16, 2017, you can deduct the mortgage interest you paid during the tax year on the first $750,000 of your mortgage debt. (If you’re married filing separately, this limit drops to $375,000.) ¹⁸

A simple end-of-year strategy to stretch this deduction to its limit is to make your January mortgage payment before December 31. That way, you can deduct the interest portion of your January payment (along with the rest of the interest you paid this year) on Schedule A of your tax return.

Again, using this strategy means you’ll have to itemize. But if your mortgage interest added into your list of itemized deductions allows you to beat the standard deduction, go for it!

Make any last-minute charitable contributions.

Spoiler alert: You can only claim charitable contributions if you itemize (seeing a pattern here?). But if you plan on donating big-ticket items like a room’s worth of fine furniture, a good chunk of cash, a vehicle or even a house to a qualified charity, itemizing may save you more than the standard deduction would.

To count your contributions toward your deductions, keep a detailed list of donations and recipients, and always get a receipt or letter from the organization confirming the date and estimated value of your donation (for cash contributions, keep a bank record like a canceled check or statement).

Finish your energy-efficient home upgrades.

If you have home upgrades that you’ve put off all year or haven’t finished yet, here are two tax credits that might make it worth doing them now—and help you save some last-minute money on your taxes.

RCEC vs. EEHIC

 

Feature	Residential Clean Energy Credit (RCEC)	Energy Efficient Home Improvement Credit (EEHIC)
Credit Rate (2025)	30% of qualified costs	30% of qualified costs
Maximum Annual Limit	No annual dollar limit (limited only by your tax liability)	$3,200 annual maximum (combined limit for all improvements)
Refundable?	No	No
Carry Forward?	Yes, unused credit can be carried forward to future tax years	No, unused credit generally expires and cannot be carried forward
Reset/Lifetime Limit	There’s no limit—but it’s generally claimed only once per property installation (like solar panels)	Annual reset: You can claim the maximum credit every year through 2025 if you make eligible improvements
Type of Home Eligible	Existing primary home or second home (used as a residence) but not a new build	Existing primary home only, not a new build
Qualified Upgrade Types	Solar panels, solar water heaters, wind turbines, geothermal heat pumps, and qualifying battery storage	Insulation, windows, doors, central HVAC, furnaces, and electric/gas heat pumps
Labor Costs Included?	Labor is included for installation	Labor is included for equipment like heat pumps—but not for things like windows and insulation
Expiration Date	December 31, 2025 (30% rate is set to end, though the credit may continue at a lower rate in the future)	December 31, 2025 (currently scheduled to expire)
IRS Form Used	IRS Form 5695, Part I	IRS Form 5695, Part II

First, let’s look at the residential clean energy credit (RCEC). This credit is good for 30% of the costs of qualified clean energy home upgrades installed up to December 31, 2025. We’re talking qualified solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, and fuel cells. Even some of your labor costs could qualify for this credit, but there are restrictions.

The RCEC is nonrefundable, which means it can only reduce your tax bill to zero (you won’t get a refund with this credit). But you can carry forward any unused credit and apply it to your taxes next year.¹⁹

Now let’s look at the energy efficient home improvement credit (EEHIC), which could save you a maximum of $3,200. But that $3,200 is broken down into annual credit limit amounts for specific items. For example, you can only get a credit of $250 per exterior door (up to $500, or two doors) per year.  

Expenses you can claim for the EEHIC include qualified insulation, central heating and air units, water heaters, boilers, heat pumps, exterior doors, windows, and home energy audits.

This credit is also nonrefundable, but unlike the RCEC, you can’t apply any unused credit to next year’s taxes.²⁰

7. Consider a Roth conversion.

This tip is a little different from the others in this article because it won’t save you money this coming Tax Day. In fact, if you do a Roth conversion, you’ll have to pay more in taxes this year.

So, why do a Roth conversion at all? Because under the right circumstances, this move could give your retirement savings a major boost and save you more in taxes in the long run. Let’s dig into that.

A Roth conversion is simply the process of transferring funds from a traditional retirement account—like a traditional 401(k), 403(b) or IRA—into a Roth account. The main reason you’d do a Roth conversion is so you can enjoy the tax advantages of a Roth IRA or Roth 401(k).

Of course, you’ll have to pay whatever taxes you owe on the money you’re converting to get those benefits. But with a Roth, you’ll get tax-free growth on your retirement savings and tax-free withdrawals at retirement. Sending the government fewer hard-earned dollars? We like the sound of that!

It only makes sense to do a Roth conversion if you meet all three of these criteria:

1. You don’t plan on retiring for at least the next five years.
2. You can pay the taxes on a Roth conversion with cash on hand.
3. You’re completely out of debt (including your mortgage).

A Roth conversion is a big financial move that could have a serious impact on your tax situation and investing strategy. That’s why you should always talk to a financial advisor before you make the switch.

8. Keep the big picture in mind.

Now, even though paying taxes can be a bummer, don’t let desperation (or the desire to outsmart Uncle Sam) drive your decision-making. Before you make any end-of-year financial decisions, consider the big picture—not just your upcoming tax bill.

In other words, don’t follow these tips just for the tax break. It’d be pretty dumb to spend thousands of dollars to qualify for a tax credit that’s only worth a few hundred. The math’s gotta math, y'all.

9. Connect with a tax professional.

The end of the year can sneak up on you sometimes. But there are plenty of options you can explore before December 31 that may help you save money on taxes—whether you’re looking to cut this year’s tax bill or save on taxes in retirement.

If you still have questions about year-end tax planning, reach out to a RamseyTrusted^® tax pro. They can walk you through the best ways for you to save money on your taxes, both now and in the future. You don’t have to be stressed about end-of-year tax planning! Get an expert in your corner so you can walk into tax season like a boss.