[{"data":1,"prerenderedAt":7},["ShallowReactive",2],{"faq-standard-7568":3},{"rec_id":4,"title":5,"text":6},"7568","Year-End Tax Tips","Year-end tax planning is an important part of managing your taxes. In general, you want to do everything you can in 2025 to increase your deductions, lower your income, and maximize your credits.\n\u003Col>\n\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_checklist.png\">\u003Cbr>\n\u003Cb>\n\u003Cli>\nIncrease Your Itemized Deductions\u003C/b>\n\u003Cbr>\nIf your itemized deductions fall just short of the Standard Deduction, you may benefit from these ways to maximize your Itemized Deductions in 2025: \n\u003Cul>\n\u003Cli>\nIncrease your charitable contributions in 2025. Make donations in 2025 that you were originally planning to make in 2026.\n\u003C/li>\n\u003Cli>\nEven if you don't itemize, donating to charities using retirement plan money donated directly from your retirement account to the charity can decrease your taxable income. \n\u003C/li>\n\u003Cli>\nSince job expenses incurred by \u003Ci>W-2\u003C/i> employees are not deductible (except for \u003Ca href=\"/freefile2025/answers?faq=7949\">certain types\u003C/a> of employees), you should ask to be reimbursed by your employer if you had any job expenses.\n\u003C/li>\n\u003Cli>\nMake January's mortgage payment in December.\n\u003C/li>\n\u003Cli>\nMake payments up to, but not over, the $40,000 ($20,000 if \u003Ci>Married Filing Separately\u003C/i>) limit on state and local taxes, real estate taxes, and personal property taxes. Here are some ideas to consider: \n\u003Cul>\n\u003Cli>\nMake your 4th quarter state estimated tax payment in December instead of January.\n\u003C/li>\n\u003Cli>\nPrepay next year's \u003Ca href=\"/freefile2025/answers?faq=8145\">real estate taxes\u003C/a> if the property tax is assessed before 2026.\n\u003C/li>\n\u003Cli>\nIf you are already over the limit, you may be able to \u003Ca href=\"/freefile2025/answers?faq=8145\">capitalize certain real estate taxes\u003C/a>.\n\u003C/li>\n\u003C/ul>\n\u003C/li>\n\u003Cli>\nPay for as many medical expenses as possible in 2025. (Medical expenses can't be deducted unless they exceed 7.50% of income. You could consider getting a health plan with a health savings account (HSA) since you can deduct HSA contributions.) \n\u003C/li>\n\u003C/ul>\n\u003C/li>\n\u003Cbr>\u003Cbr>\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_withholding.png\">\u003Cbr>\n\u003Cb>\n\u003Cli>\nAdjust Your Withholding\u003C/b>\n\u003Cbr>\nWhen you're new to a job, you fill out a \u003Ci>Form W-4\u003C/i>. The \u003Ci>W-4\u003C/i> determines how much federal and state taxes are withheld from your paycheck. You may want to give your employer a new \u003Ci>Form W-4\u003C/i> if the taxes being withheld are too much or too little. You can get the most accurate withholding estimate by using the \n\u003Ca href=\"https://www.irs.gov/individuals/tax-withholding-estimator\" target=\"blank\">IRS's estimator tool\u003Cspan class=\"append_external\" style=\"margin-right:4px;\"> \u003C/span>\u003C/a>.\n\u003Cbr>\u003Cbr>\nIf you owe taxes each year, you could fill out a new \u003Ci>Form W-4\u003C/i> and choose an extra withholding amount so your employer withholds more taxes from your paycheck. This will reduce the amount of taxes you owe with your tax return because you'll be paying those taxes throughout the year instead.\n\u003Cbr>\u003Cbr>\nIf you're getting a big refund every year, you could increase your estimated deductions amount so your employer withholds less tax from your paycheck. This will lower your tax refund, but it gives you extra money in your paycheck each month rather than having to wait over a year to get that money back as part of your tax refund.\n\u003Cbr>\u003Cbr>\nWhen you have a life change such as getting married or divorced, buying a home, having a baby, or have a child leave home, you should probably file a new \u003Ci>W-4\u003C/i> with your employer to reflect your current situation.\n\u003C/li>\n\u003Cbr>\u003Cbr>\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_income.png\">\u003Cbr>\n\u003Cb>\n\u003Cli>\nLower or Increase Your Income to Maximize Credits and Deductions\u003C/b>\n\u003Cbr>\nMany credits and deductions are affected by your income. If your income is too low, you might not qualify for the full amount of a credit or deduction. On the other hand, if your income is too high, a credit or deduction might be reduced. The \u003Ci>Earned Income Credit\u003C/i> and \u003Ci>Child Tax Credit\u003C/i> are examples of credits that can be affected in this way.\n\u003Cbr>\u003Cbr>\nHow to Lower Your Income:\n\u003Cul>\n\u003Cli>\nAsk your boss if your year-end bonus can be paid to you in January instead of December.\n\u003C/li>\n\u003Cli>\nIncrease your 401(k) contributions.\n\u003C/li>\n\u003Cli>\nMake a traditional IRA contribution.\n\u003C/li>\n\u003Cli>\nSell incentive stock options in January instead of December.\n\u003C/li>\n\u003Cli>\nIf you own a business, delay collecting revenue from late December to early January or purchase equipment and supplies in December.\n\u003C/li>\n\u003Cli>\nIf you have gains from selling successful stocks during the year, sell some stocks that have gone down in value to offset the stock gains.\n\u003C/li>\n\u003Cli>\nWait to sell profitable investments until January.\n\u003C/li>\n\u003Cli>\nIf you have self-employment income or own a rental property, gather your receipts and search your checkbook to find every deduction you can take.\n\u003C/li>\n\u003C/ul>\nHow to Increase Your Income:\n\u003Cul>\n\u003Cli>\nDo the opposite of the tips above.\n\u003C/li>\n\u003Cli>\nMake sure you are reporting all cash earned from side jobs such as babysitting, house cleaning, and lawn cutting.\n\u003C/li>\n\u003C/ul>\n\u003C/li>\n\u003Cbr>\u003Cbr>\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_aoc_credit.png\">\u003Cbr>\n\u003Cb>\n\u003Cli>\nIncrease Your American Opportunity Credit\u003C/b>\n\u003Cbr>\nIf you paid less than $4,000 of tuition for your college student, you can pay for the first semester or quarter of next year's college tuition in December and use that tuition for this year's American Opportunity Credit.\n\u003Cbr>\u003Cbr>\nHowever, you want to do the exact opposite if you've already paid more than $4,000 for your college student who qualifies for the American Opportunity Credit. You get no additional benefit from the American Opportunity Credit if you pay more than $4,000 in tuition each year. In this case, you'd want to wait until January to pay tuition. That way you might increase your American Opportunity Credit next year since you've already maxed out the allowed credit this year. \n\u003Cbr>\u003Cbr>\nBe sure to watch for a \u003Ci>Form 1098-T\u003C/i> from your college or university.\n\u003C/li>\n\u003Cbr>\u003Cbr>\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_college.png\">\u003Cbr>\n\u003Cb>\n\u003Cli>\nClaim Your College Student Child\u003C/b>\n\u003Cbr>\nA college student's parents almost always get more tax benefit from claiming their child as a dependent than the college student gets from claiming themselves. This is because the parents' tax bracket is usually higher, so they usually benefit more from the education credits than the student does. See \u003Ca href=\"/freefile2025/answers?faq=8146\">exception for high income earners\u003C/a>.\n\u003Cbr>\u003Cbr>\nYou can only claim the education credits if you're claiming the student as a dependent. If you can claim your child as a dependent, make sure you coordinate with each other so your child doesn't try to claim themselves on his or her own return. \n\u003C/li>\n\u003Cbr>\u003Cbr>\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_flex_spend.png\">\u003Cbr>\n\u003Cb>\n\u003Cli>\nSpend Your Flex Plan\u003C/b>\n\u003Cbr>\nSome flexible spending accounts let you carry over up to $610 from one year to the next or let you have a grace period to spend unused funds the next year. Other flex plans require you to spend all of it by the end of the year (the use-it-or-lose-it rule). Check your plan terms and if you have too much money in your flex plan, spend it on any medical expenses you can such as doctor visits, orthodontists, prescription medications, etc.\n\u003C/li>\n\u003Cbr>\u003Cbr>\u003Cimg src=\"/taxesCommon2025/v4.40.0-1490/images/tax_tip_wages.png\">\u003Cbr>\n\u003Cli>\n\u003Cb>Qualifying for the Qualified Business Income (QBI) Deduction\u003C/b> \n\u003Cbr>\nYou may qualify for the QBI deduction if you had business income (\u003Ci>Schedule C, F,\u003C/i> or \u003Ci>E\u003C/i>). The QBI deduction is generally 20% of your net qualified business income. However, if your taxable income is over $197,300 ($394,600 if \u003Ci>Married Filing Jointly\u003C/i> or $197,300 if \u003Ci>Married Filing Separately\u003C/i>), then your deduction will start to be limited by wages paid to employees. Once fully phased in, the deduction is limited to no more than 50% of wages paid. If you're self-employed, have high taxable income, and will be limited by the wage limitation, you could consider hiring an employee and paying them wages to increase your QBI deduction.\n\u003C/li>\n\u003C/ol>",1777391487467]