It’s the End of the Year as We Know It!
Quick Take
Twelve weeks left in 2025 means plenty of time to act: Year-end is an ideal window to review your financial picture, fine-tune your tax strategy, and position yourself for a stronger start to 2026.
Roth conversions can hedge against future uncertainty: Converting pre-tax retirement dollars to a Roth IRA now can create tax-free growth later and protect against the possibility of higher income or future tax rates.
2025 is a prime year for charitable giving: With the charitable deduction cap set to tighten in 2026, higher-income taxpayers may see more value in making larger or “bunched” gifts before year-end.
Expanded SALT deduction offers temporary relief: The increase to a $40,000 deduction limit (with phase-downs starting at $500,000 AGI) provides short-term planning opportunities worth reviewing with your tax advisor.
Don’t overlook smaller but meaningful year-end items: Review Medicare coverage, use remaining FSA balances, prepay mortgage interest, and verify your tax withholding to avoid surprises come filing season.
It’s hard to believe we are just twelve weeks from 2026. While the year is coming to a close, there is still plenty of time to ensure your finances end the year on a positive note. Consider several end-of-year planning opportunities if you want to minimize your tax bill, maximize your savings, and boost your financial health as we head into the new year. Here’s a checklist of financial planning opportunities to consider making the most of what’s left of 2025.
Roth Conversions
As 2025 winds down, it’s worth evaluating whether a Roth conversion makes sense for your long-term plan. A Roth conversion involves moving money from a traditional IRA or other pre-tax retirement account into a Roth IRA, paying taxes on the converted amount now in exchange for tax-free growth and withdrawals in retirement.
A Roth conversion can be particularly appealing if you expect your income to rise in the future or want to hedge against the possibility of higher tax rates down the road—after all, the tax code is written in pencil, not pen. Paying taxes today could mean locking in rates that may look favorable years from now, particularly if your income is expected to rise or tax laws change in the future.
Planning note: A Roth conversion can be most effective when done strategically—often by filling up your current tax bracket without spilling into the next one. Work with your advisor and tax professional to estimate the tax cost and determine the right conversion amount, especially if you’re coordinating with other year-end moves like charitable gifts or capital gains harvesting.
Charitable Giving
For higher-income taxpayers, 2025 could be an especially good year to make larger charitable gifts. Starting in 2026, the deduction for itemized charitable contributions will be capped at 35%, even for those currently in the 37% tax bracket. In other words, gifts made this year may offer greater tax value than gifts in subsequent years.
Keep in mind that charitable deductions only apply to the portion of your giving that exceeds 0.5% of your adjusted gross income (AGI). For instance, if your household AGI is $1 million, only donations above $5,000 would qualify for a deduction.
Planning note: If you’re thinking about a substantial charitable gift, it may make sense to complete it in 2025 to take advantage of the higher deduction rate. You could also consider “bunching” contributions—combining several years’ worth of donations into one larger gift—to help clear the AGI-based threshold and maximize your overall tax benefit.
Changes to Your State and Local Tax Deduction
There have been some temporary changes to the state and local tax (SALT) deduction that could affect higher-income taxpayers over the next few years.
The previous $10,000 deduction limit has been increased to $40,000 through 2029, which offers some welcome relief for those who itemize deductions. However, the new rules include an income-based phase-down that’s worth paying attention to. For every dollar of adjusted gross income (AGI) above $500,000, the deduction is reduced by 30 cents.
In practical terms, households with AGI of $600,000 or more will see their deduction capped again at $10,000—essentially phasing out the benefit of the higher limit for top earners.
Planning note: If you expect your income to fluctuate around the $500,000 threshold, it’s worth reviewing your income timing and deduction strategy with a tax professional. Managing the recognition of income or accelerating deductible expenses in certain years could help you take fuller advantage of the expanded SALT deduction while it’s still available.
Other Planning Opportunities & Reminders
Medicare Open Enrollment, which runs annually from October 15 to December 7, is vital for anyone enrolled in Medicare or looking to join for the first time. It’s your once-a-year opportunity to review your current coverage, make adjustments, and ensure your plan still fits your health needs and financial situation. Use Medicare's online Plan Finder Tool to compare your current plan with others that may offer better savings.
Have a balance in your flexible spending account (FSA)? Most FSA programs are “use it or lose it” and do not allow you to roll a balance into the next year. If you have a balance, consider reviewing qualified expenses to use up the funds and zero out the account before December 31st. You can find a complete list of medical FSA-qualified expenditures here.
Itemize deductions and have a mortgage? Consider making your January mortgage payment in December so that the interest is deductible on your 2025 tax return.
Were you subject to an estimated tax penalty in 2025? Review your federal tax withholding to confirm it is appropriate as we move into the new year.
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