7 Tax Strategies to Easily Lower Your Tax Bill

As 2025 draws to a close, now is the perfect time to take a proactive look at your finances and prepare for tax season. Smart end of the year tax strategies can make a big difference in how much you owe—or how much you get back—come April. Whether you’re a small business owner, freelancer, or individual taxpayer, these strategies can help you reduce your taxable income and set yourself up for financial success.

7 End of the Year Tax Strategies

1. Review Your Withholdings and Estimated Payments

Life changes—so should your tax strategy. If you’ve had a shift in income, started a new job, or added side income this year, review your W-4 or estimated tax payments. Making adjustments now helps prevent surprises later, like underpayment penalties or a large tax bill in April.

Also, be sure to gather any needed documents for changes that may have happened to your family. That may include marriages, births, deaths, or divorces.

2. Max Out Retirement Contributions

Contributing to your retirement accounts is one of the easiest ways to lower your tax bill while building long-term security.

• Employees: Contribute up to $23,000 to your 401(k) for 2025.
• Self-employed: Consider SEP IRAs or Solo 401(k)s for even higher limits.
  Every dollar you contribute reduces your taxable income and boosts your financial future.

3. Take Advantage of Business Deductions

Small business owners can reduce their taxable income by making strategic purchases before year-end.

Consider:

• Upgrading equipment or software
• Stocking up on office supplies
• Paying January rent or utilities early
• Making charitable donations in your business’s name
  

Section 179 deductions allow you to write off the full cost of qualifying equipment, vehicles, or technology purchased in 2025.

4. Harvest Investment Losses

The end of the year is the perfect time to take a closer look at your investment portfolio—not just for performance, but for potential tax savings. This strategy, known as tax-loss harvesting, allows you to use investment losses to offset taxable gains and, in some cases, even reduce your ordinary income.

Here’s how it works: if you’ve sold investments at a profit (capital gains), you can sell other investments that have declined in value (capital losses) to balance out those gains. For example, if you made $5,000 in capital gains from one stock but lost $3,000 on another, your net taxable gain would be reduced to $2,000.

But the benefits don’t stop there—if your losses exceed your gains, you can use up to $3,000 ($1,500 if married filing separately) of those losses to offset other types of income, such as wages or self-employment earnings. Any additional unused losses can be carried forward to future tax years, helping reduce your tax burden over time.

Important Things to Know:

• Avoid the “Wash Sale” Rule: If you sell an investment at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the IRS will disallow the deduction. Plan carefully to avoid losing your tax benefit.
• Reinvest Strategically: Instead of buying the same stock, consider a similar investment that maintains your portfolio balance but doesn’t trigger the wash sale rule.
• Think Long-Term: Tax-loss harvesting is not just about saving money now—it’s about managing your investments smartly year after year to create sustainable tax efficiency.

Even modest losses can make a difference when applied to tax strategies. Reviewing your investment portfolio before December 31 can uncover opportunities to reduce taxes and set you up for stronger financial growth in the year ahead.

If you’re unsure how to apply these tax strategies safely, Cowdery Tax and Business Solutions can help you coordinate with your financial advisor to make the most of your tax planning opportunities—without stepping into any IRS pitfalls.

5. Make Charitable Contributions

Donations to qualified charities made before December 31 can reduce your taxable income. Keep records of your contributions, especially for cash gifts over $250, which require written acknowledgment from the organization.

6. Organize Financial Records Early

Gather your tax documents now—W-2s, 1099s, receipts, invoices, and business records. Organizing ahead saves stress later and ensures you don’t overlook valuable deductions.

7. Consult a Tax Professional

Tax laws can change quickly, and professional guidance ensures you’re not missing any credits or deductions. A tax expert can also help you plan for 2026, when several key provisions from the 2017 Tax Cuts and Jobs Act are set to expire.

Planning for these end of the year tax strategies is your opportunity to make smart financial decisions that pay off in the new year. Take the time now to review your situation, make contributions, and fine-tune your strategy.

Need help maximizing your deductions or planning for next year’s changes? Cowdery Tax and Business Solutions can help you finish 2025 strong and start 2026 with confidence.

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.