As the end of the tax year approaches, financial strategists are urging Americans to take action now in order to reduce their 2025 tax bills and maximize potential refunds. According to estimates, the average tax refund is expected to increase by more than $600 next year, making year-end tax planning especially worthwhile for individuals and families across the United States. Tax experts say that proactive choices in the final months of the year can directly impact your bottom line when filing next spring.

Key Moves Before December 31, 2024

• Maximize Retirement and College Savings Contributions
  December 31 is the critical deadline for making contributions to workplace retirement accounts, such as 401(k)s, and to college savings plans like 529 accounts. In 2024, workers can contribute up to $23,000 to a 401(k), with an additional $7,500 catch-up for those aged 50 and older. Contributions made by year-end can directly lower taxable income, potentially saving hundreds or thousands in federal taxes. The opportunity also extends to college savings, where up to $17,000 in annual gifts can be made without triggering gift tax. Those age 73 or older should also ensure required minimum distributions (RMDs) are taken to avoid steep IRS penalties. For further details, see Yahoo Finance.
• Harvest Investment Losses
  Investors with portfolios that include underperforming stocks or other assets can use a technique known as tax loss harvesting. Selling such assets before the new year allows taxpayers to offset capital gains elsewhere in their portfolio and apply up to $3,000 in remaining losses against ordinary income. Any excess losses can be carried forward to future tax years. Investors should note the IRS 'wash sale rule,' barring re-purchase of the same or substantially identical asset within 30 days of the sale.
• Consider Itemized Deductions
  In 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. However, itemizing can be beneficial if deductible expenses—such as significant medical bills, mortgage interest, state and local taxes (capped at $10,000 until 2025), and charitable contributions—exceed these amounts. Taxpayers 65 or older are eligible for an extra deduction, and certain tipped and hourly workers could see additional special benefits, including the possibility to exclude some tip or overtime income from taxable income through 2025.
• Evaluate Roth IRA Conversion
  A Roth IRA conversion moves assets from a traditional IRA to a Roth IRA, triggering current-year taxes but enabling tax-free withdrawals in the future, provided certain conditions are met. This move can be advantageous for those who anticipate higher future tax rates or want to manage RMDs more effectively. Those in higher income brackets might explore 'backdoor' or 'mega backdoor' Roth strategies to bypass standard contribution limits.
• Make Charitable Donations and Year-End Gifts
  Individuals may give up to $18,000 per person in 2024 without incurring gift tax, or $36,000 for married couples splitting gifts. Charitable donations, including appreciated assets like stocks, can provide tax deductions as well as capital gains tax savings. From 2025, a new rule permits a deduction of up to $600 in cash charitable contributions ($1,200 for married couples), but the deduction rate on total charitable contributions will fall from 60% to 50%. Donors planning significant contributions should do so before the new rules take effect.

Strategic Tax Moves for the 2025 Tax Year

As the end of 2025 nears, Americans should also be aware of additional changes introduced by federal legislation:

• Leverage the Increased Standard Deduction
  For 2025, the standard deduction rises to $15,000 for single filers, $30,000 for married couples filing jointly, and $22,500 for heads of households. Taxpayers 65 and older can claim an additional $1,600 (or $2,000 per couple). This expanded deduction reduces taxable income for millions. (Kiplinger)
• Utilize Enhanced State and Local Tax Deduction
  The "One Big Beautiful Bill Act" has temporarily boosted the state and local tax (SALT) deduction cap to $40,000 for taxpayers earning less than $500,000, from 2025 through 2029. This is particularly advantageous for residents in high-tax states such as California and New York. Prepaying property or other local taxes before December 31 is one way to maximize this benefit. (Kiplinger)
• Claim the Increased Child Tax Credit
  The child tax credit rises to $2,200 per qualifying child in 2025, offering direct relief by reducing tax owed dollar for dollar. If you have eligible dependents, claiming this credit can make a tangible difference. (The Week)
• Deduct Auto Loan Interest for U.S.-Assembled Vehicles
  A new provision allows taxpayers to deduct up to $10,000 in auto loan interest per year for new vehicles assembled in the United States, purchased from January 1, 2025, through December 31, 2028. Buyers considering a new vehicle may wish to act before year's end to capture this benefit. (Wikipedia)
• Prepare for Changes in Green Energy Tax Credits
  The "One Big Beautiful Bill Act" is also accelerating the phase-out of certain green energy credits, with some set to expire as soon as 2025. Those contemplating investments in renewable energy systems or purchases of electric vehicles should consider acting swiftly to secure available credits. (The Week)

Implementing these tax-saving tactics before the December 31 deadlines each year could optimize your financial situation and help reduce your future tax burden. Taxpayers are advised to keep up with changing federal and state legislation, and to consult with a tax professional for tailored advice. For further information on these strategies, see the original article at Yahoo Finance.