Effective tax planning strategies are essential for achieving financial wellness and securing your future. As the end of the year approaches, now is the ideal time to review your financial situation and prepare for tax planning 2025.
This guide offers proven strategies to help you maximize tax deductions, boost retirement savings, and make smart investment decisions to reduce your overall tax bill.
Before diving into strategy, it’s important to note the new tax law changes introduced by the One Big Beautiful Bill Act (OBBBA). Several key provisions are now permanent, including:
The law also introduces enhanced retirement contribution caps and adjusts income thresholds affecting eligibility for credits and deductions. These changes have significant implications for individual tax planning, making it essential to review how the OBBBA impacts your specific situation.
The U.S. follows a progressive tax system with seven federal income tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This means only the portion of your income within each bracket is taxed at that rate—not your entire income at the highest bracket.
One of the most important tax decisions is whether to take the standard deduction or itemize.
The Standard Deduction
This is a fixed dollar amount that you can subtract from your adjusted gross income (AGI) to reduce your taxable income. The amount is determined by your filing status and age. For 2025, the standard deduction amounts are:
With the OBBBA, taxpayers aged 65 and older are eligible for an additional $6,000 deduction. This extra deduction phases out for individuals with a modified adjusted gross income (MAGI) over $75,000 and married couples with incomes over $150,000.
Itemizing Deductions
If your total eligible expenses exceed the standard deduction amount, it may be more beneficial to itemize. Common itemized deductions include:
It’s wise to calculate your potential itemized deductions to determine which option results in a larger deduction.
While deductions lower taxable income, a tax credit directly reduces the tax you owe dollar-for-dollar. For example, a $1,000 tax credit lowers your tax bill by $1,000.
Credits often target families, education, retirement savings, and energy efficiency. With the OBBBA, many clean energy tax credits were either eliminated or given early expiration dates. It is more important than ever to stay aware of current opportunities.
Credits generally fall into three types: refundable, nonrefundable, and partially refundable. Understanding which type applies can significantly impact your tax savings.
Common Tax Credits in 2025
One of the most powerful tax planning strategies is maximizing retirement contributions. These contributions reduce taxable income for the year and also build long-term financial security.
If your employer offers a 401(k) or 403(b) plan, contribute as much as possible to reap the most benefits. For 2025, contribution limits are:
These pre-tax contributions reduce your taxable income, providing an immediate tax break.
Beyond workplace plans, IRAs offer another excellent vehicle for retirement savings.
For 2025, the IRA contribution limit is $7,000, with an additional $1,000 catch-up contribution available for those aged 50 and older. High-income earners who are phased out of Roth IRA contributions may benefit from the "Backdoor Roth IRA" strategy.
Several other accounts offer significant tax advantages for specific goals, such as healthcare and education.
Strategic investment portfolio management can significantly reduce your tax exposure.
Annual gifting is one of the simplest, most effective tax planning strategies for transferring wealth. In 2025, you can give up to $19,000 per recipient (or $38,000 for married couples filing jointly) to as many people as you like without reducing your lifetime estate tax exemption.
Gifts above the annual limit aren’t immediately taxable but do reduce your lifetime estate and gift tax exemption. Under the OBBBA, the estate tax exemption has been permanently increased. In 2025, the exemption is:
By combining the annual exclusion with the lifetime exemption, you can significantly reduce the size of your taxable estate while supporting heirs or loved ones tax-efficiently.
As the year comes to a close, a few timely adjustments can have a big impact on your tax outcome.
Review your Form W-4 to ensure the right amount is withheld from your paychecks. This is especially important after major life events like marriage, a new child, or if you started a side job. Proper withholding helps you avoid a large, unexpected tax bill or giving the government too much money upfront.
To maximize your charitable tax deductions, consider donating appreciated stock instead of cash. This allows you to deduct the full market value of the stock and avoid paying capital gains tax on its appreciation. Consider "bunching" several years of charitable donations into one year to exceed the standard deduction threshold.
The SECURE 2.0 Act raised the age for starting RMDs to 73. Beginning in 2033, the RMD increases to 75 for those born in 1960 or later. These mandatory withdrawals from traditional retirement accounts are taxable income. Planning ahead helps manage taxable income and avoid penalties.
Core Strategies for Most Taxpayers
Advanced Strategies for High Earners
Tailored Strategies for Retirees
Proactive tax planning is essential for building and preserving wealth. By maximizing retirement savings, leveraging deductions and credits, and making informed investment choices, you can significantly reduce your tax burden.
While this guide provides a solid foundation, every financial situation is unique, and tax laws continue to evolve.
At LTax, we help individuals and families create tailored strategies designed to maximize tax efficiency and secure long-term financial success.
Secure your financial future—schedule a consultation with an LTax tax advisor today.
LEGAL OR TAX: The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent engagement agreement with a licensed attorney or tax professional.