Before December 31st: Essential Tax Actions Every Investor Should Take
Year-End Tax Playbook: 12 Smart Moves to Lower Your 2025 Tax Bill
As we approach year-end, I want to share a helpful checklist of tax strategies investors and traders can use before December 31st to potentially reduce their 2025 tax bill.
These are simple but powerful moves that professional traders and high-net-worth investors use every year — and they’re available to all of us.
Please remember: this is educational guidance only. Your personal tax situation may vary, so always confirm details with your CPA.
Let’s get into it.
✅ 1. Tax-Loss Harvesting (One of the Most Powerful Tools)
If you have losing positions in your taxable accounts, you can sell those positions before Dec 31 to realize a capital loss.
You can use these losses to reduce taxes in three ways:
Offset capital gains (short- or long-term)
Offset up to $3,000 of ordinary income
Carry forward unused losses indefinitely
⚠ Avoid the Wash Sale Rule
If you buy the same or “substantially identical” security within 30 days before or after the sale, the loss is disallowed.
Tip: If you want to stay invested, swap into a similar but not identical ETF or stock.
✅ 2. Harvesting Gains When Your Income Is Low
If 2025 was a lower-income year for you, you may qualify for the 0% long-term capital gains bracket.
It can make sense to:
Sell a long-term appreciated position
Realize the gain tax-free
Immediately buy it back (no wash sale rule on gains)
This “basis reset” can save you thousands later.
✅ 3. Max Out Tax-Advantaged Accounts
Before year end, make sure you’ve contributed to:
• 401(k)
2025 limit: $23,000 (+$7,500 catch-up for age 50+)
• IRA or Roth IRA
Up to $7,000 (+$1,000 catch-up)
While IRA contributions can be made until tax day, 401(k) contributions must be made before Dec 31.
✅ 4. Consider a Roth Conversion (If You Are in a Lower Tax Bracket This Year)
A Roth conversion allows you to move pre-tax assets into a Roth IRA.
You pay taxes now, but all future growth becomes tax-free.
Best used when:
Your income is temporarily lower
Markets are down
You expect higher tax rates later
Many investors perform partial conversions each year to “fill up” their current tax bracket.
✅ 5. Optimize Your Charitable Giving
Charitable contributions must be made before Dec 31 to count for this year.
Options include:
Cash donations
Appreciated stock (best for tax efficiency)
Donor-Advised Funds (DAFs)
Qualified Charitable Distributions (age 70½+)
Donating appreciated stock gives you a double benefit:
You deduct the fair market value
You avoid paying capital gains tax on the appreciation
✅ 6. Review and Adjust Estimated Tax Payments
If you:
Trade actively
Had large capital gains
Own a business
…you may need to make a final estimated tax payment in January to avoid penalties.
This is especially important for options traders or short-term traders with:
Large realized gains
1256 contracts (Section 1256 MTM gains taxed at 60/40)
K-1 income
✅ 7. Evaluate Qualified Opportunity Zones (QOZ)
If you realized large capital gains this year, you can defer taxes by reinvesting gains into a Qualified Opportunity Zone fund.
Benefits include:
Defer tax until 2027
Potential tax-free growth after 10 years
This strategy is niche but powerful for large taxable gains.
✅ 8. Review Your Trading Entity Structure (If Applicable)
Active traders should review whether their current structure is optimal:
Sole proprietorship
LLC
S-Corp
Trader Tax Status (TTS)
Mark-to-Market (MTM) election for 2026
A proper structure can help with:
Expense deductions
Health insurance deductibility
Retirement contributions
Simplified tax treatment
Note: the deadline for a 2025 MTM election has passed, but you can prepare for 2026.
✅ 9. Fund a Solo 401(k) (If You Have Side Income or Trading Entity Income)
Solo 401(k) plans allow huge tax-deferred contributions.
If you have:
Consulting income
Real estate income
Trading business income
…you may be able to shelter a large portion of it.
Plan must be created by Dec 31, but contributions can be made next year.
✅ 10. Take Required Minimum Distributions (RMDs)
If you are age 73+, or inherited retirement accounts, be sure to take RMDs before Dec 31 to avoid a 50% penalty.
✅ 11. Review Your HSA and FSA Contributions
Health Savings Accounts are extremely tax-efficient:
Tax-deductible going in
Tax-free growth
Tax-free withdrawals
You can still maximize contributions if you have a qualifying plan.
✅ 12. Clean Up Your Financial House (The Overlooked Step)
Before year end, review:
Beneficiary designations
Estate plan basics (will, POA, trust updates)
Account titling
Concentrated positions
Unrealized gains/losses
Cash flow for next year
A one-hour review saves headaches later.
Final Thoughts
Year-end is the single most important window for investors to optimize taxes.
A few smart, proactive moves can save thousands in April — and set you up for a stronger 2026..
Stay smart, stay proactive,
Grow Your Pile
