Last-Minute Tax Savings Strategies to Lower Your 2025 Tax Bill

As 2025 winds down, most people are focused on closing out projects, hitting annual goals, and getting together with family for the holidays. But there’s another deadline that deserves your attention. December 31 is your last opportunity to apply tax-saving strategies that could put thousands of dollars back in your pocket.

You don’t need to be a tax expert to take advantage of these strategies. A little bit of planning and a few smart decisions in the coming weeks can significantly reduce your 2025 tax bill and help you start the new year on a strong foot.

Why Year-End Tax Planning Matters

If you’re not feeling especially motivated to tackle year-end tax planning, that’s perfectly normal. But keep in mind, taking the time to plan ahead could save you money down the road. Think of it like you’re packing for a trip. You could throw everything in a suitcase the night before and hope it all fits, or you could make your life easier by making strategic choices about what to bring. Tax planning is a lot like your financial packing strategy.

If you wait until next spring to think about taxes, your options will become much more limited. By December 31, your income is locked in, your deductions are set, and you’re working with whatever cards you’ve been dealt. Taking action now can give you more control over your tax situation and potentially reduce your overall bill.

Prepay Expenses for Next Year

If you run a business or have significant deductible expenses coming up in early 2026, consider prepaying them before December 31. This will shift those deductions into the current tax year where they might be more beneficial.

Business owners can prepay insurance premiums, rent, subscriptions, or professional memberships that cover the first few months of 2026. Just make sure these are legitimate business costs that you have to pay anyway. The IRS doesn’t look too kindly on prepaying for services just so you can claim a deduction.

For individuals, consider prepaying your January mortgage payment, making a 4th quarter estimated state tax payment, or paying property taxes early if they’re due in January. Medical expenses can also be prepaid if you’re close to the 7.5 percent adjusted gross income threshold required to deduct them. This might yield some benefits if you are itemizing your deductions.

Take Advantage of Your Health Savings Account

If you have a high-deductible health plan, your Health Savings Account (HSA) offers even more tax benefits. Your contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.

For 2025, you can contribute up to $4,300 for self-only coverage or $8,550 for family coverage. Those 55 and older can add an extra $1,000 catch-up contribution. Unlike flexible spending accounts, HSAs don’t have a use-it-or-lose-it rule. Your contributions roll over year after year, which can grow into a substantial healthcare fund for retirement.

Pay Attention to Your Investment Losses

If you have investments in taxable accounts, December is the time to review your portfolio for tax-loss harvesting opportunities. You can reduce your taxable income by selling investments that have declined in value, offsetting capital gains.

If your losses exceed your gains, you can deduct up to $3,000 of excess losses against your ordinary income. Any remaining losses carry forward to future years. If you’re planning on harvesting losses, make sure you’re aware of the wash-sale rule, which prevents you from claiming a loss if you buy the same or substantially identical security within 30 days before or after the sale.

Get Your Financial Records in Order

Save yourself some stress next spring by organizing your financial records now instead of later. You can prevent the usual tax season scramble by creating a system for organizing receipts, whether they’re digital or physical.

This is also a great time to gather together all of your year-end statements, like W-2s, 1099s, mortgage interest statements, property tax records, charitable donation receipts and investment statements. Making sure you have everything in one place before you meet with your accountant saves time and lowers the chance of valuable deductions falling through the cracks.

For business owners, check to see if your bookkeeping is up-to-date. Reconcile your bank accounts, update your accounting software, and confirm that all your business expenses are properly categorized.

Charitable Contributions

December is a great time to make your charitable giving count for 2025. Donations to qualified charitable organizations are tax-deductible — but only if you itemize your deductions.

If you’re planning on itemizing your deductions, you can think about bunching your charitable contributions to save more money. Instead of giving $5,000 each year, you might give $10,000 or $15,000 in one year to push you over the standard deduction threshold.

For those 70 or older with traditional IRAs, qualified charitable distributions allow you to donate up to $108,000 directly from your IRA to charity. This amount counts toward your required minimum distribution (but doesn’t increase your taxable income).

Equipment Purchases for Small Business Owners

If your business needs new equipment, December might be the perfect time to buy – especially if that equipment is on sale. You can deduct up to $2.5 million in qualifying equipment purchases for 2025, with the deduction phasing out once purchases exceed $4,000,000.

This kind of tax deduction applies to vehicles, computers, office furniture and machinery. Just make sure you’re buying equipment your business actually needs.

Maximize Your Retirement Contributions

One of the easiest ways to save money on taxes is maxing out your retirement account contributions, where the government actually rewards you for saving for your future.

For 2025, you can contribute up to $23,500 to your 401(k), with an additional $7,500 catch-up contribution if you’re 50 or older. That’s over $30,000 in savings that you can use to reduce your taxable income. If you’re self-employed or running a small business, try looking into SEP IRAs or solo 401(k)s, which offer even higher contribution limits.

Traditional IRA contributions have a $7,000 limit for 2025, with an additional $1,000 catch-up contribution for those 50 and over. While these contributions are tax-deductible (subject to income limitations), they can lower your current tax bill while building your retirement nest egg. And there is one distinct difference between your IRA and other tax-saving strategies. You can contribute to it up until April of 2026 and still count it toward the 2025 tax year.

Take Action Before December 31

The most important thing to remember about most of these tax-saving strategies is that they require action before December 31. So, take some time in the next few weeks to review your financial situation. Look at your retirement contributions and deductible expenses, and get your records organized.

Here at First Utah Bank, we’ve seen firsthand how these strategies can help you save money during tax season. If you’re unsure about what might work best for your situation, we highly recommend speaking to a qualified tax professional for personalized advice. From business accounts that simplify expense tracking, to personal banking solutions that keep you organized, we’re your partner in building a stronger financial future with tools that help along the way.