Summary

Ensure you're prepared for the 2025 tax season with our list of year-end tax tips. Discover strategies designed to optimize savings and help minimize taxes.

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Year-end tax-savings tips

4 minute read • August 26, 2025

Woman in a red sweater smiling and holding her cell phone.

It's hard to believe that the end of the year is just around the corner. Taxes may not be as exciting as the holidays, but thinking about them now can help you start the new year on the right foot.

Here are 5 tax-saving tips you can use to help you get on track for next year

Max out your retirement contributions

IRAs are a great way to save for retirement and reduce your taxes. The current maximum contribution for both traditional and Roth IRAs is $7,000 ($8,000 if you're age 50 or older). Anyone with earned income can contribute to a traditional IRA, regardless of how much they earn, but Roth IRAs have income limits that affect who can contribute.

Investing in a traditional IRA and contributing the maximum can help reduce your taxable income.¹ And while your contributions to a Roth IRA aren't tax-deductible, you can save money on taxes later. That's because Roth IRAs allow you to make tax-free withdrawals as long as you're age 59½ or older and you've owned the account for at least 5 years.²

Another way to reduce your taxable income at the end of the year is to maximize your contributions to your 401(k) or 403(b) plan. By putting more money into your employer-sponsored plan, you not only set yourself up for a more secure financial future but also lower your current taxable income. For example, if you contribute the maximum amount allowed by the IRS, you can significantly reduce the amount of income that's subject to taxes. This means more money stays in your pocket, and you get a nice tax break while you're saving for retirement.

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Harvest tax losses

If you have investment losses in the current year, you can use them to offset both your investment gains and ordinary income up to $3,000. This strategy, known as tax-loss harvesting, is used in taxable accounts to help minimize tax liability. In short, you can sell investments at a loss to offset your gains from other investments.³

If you buy the same investment or any investment the IRS considers "substantially identical" within 30 days before or after you sold at a loss, you won't be allowed to claim a deduction on the loss. This is known as the wash sale rule. If you need guidance on whether an investment would be considered substantially identical, consult a tax advisor.

Revisit your filing status

Your tax-filing status can have a significant impact on your tax liability. If you're considering making a change to your filing status, be sure to understand the tax implications.⁴

For example, if you're married and filing jointly, you'll have a higher standard deduction and a lower tax bracket than if you file separately. However, if you have a high household income, you may be able to save money on your taxes by filing separately. Considering your options now can make for a smoother tax season next year.

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Maximize tax deductions and credits

Maximizing tax deductions and credits can be a powerful way to lower your tax bill. A tax deduction reduces the amount of income that's subject to tax, while a tax credit directly reduces the amount of tax you owe, dollar for dollar. For instance, the child tax credit can provide up to $2,000 per qualifying child, and the child and dependent care credit can help cover the costs of child care so you can continue working or look for a job.

If you're still paying off student loans, the student loan interest deduction can reduce your taxable income by up to $2,500. Donating to charity? The charitable contribution deduction lets you write off those contributions. And if you have significant medical or dental expenses, the medical and dental expense deduction can help offset those costs.

If you're over age 70½, you can make a qualified charitable distribution (QCD) directly from your IRA to a qualified charity, which not only counts toward your required minimum distribution (RMD) but also reduces your taxable income. This strategy can be particularly beneficial if you don't itemize deductions, as it allows you to support your favorite causes while potentially lowering your tax bill.

By taking advantage of these and other deductions and credits, you can keep more of your hard-earned money. Find more information on credits and deductions on the IRS website.

Seek tax-efficient investments

When you choose tax-efficient investments, you can help reduce your tax bill now and in the future. Here are some examples:

Tax-deferred accounts like traditional IRAs and 401(k) plans allow you to defer your investment gains until you start withdrawing your money.
Roth IRAs allow you to contribute after-tax dollars, and your withdrawals in retirement are tax-free. But there are income limits that affect who can contribute.
Investments like municipal bonds are generally exempt from federal income tax.
Tax-advantaged accounts like 529 plans and health savings accounts offer tax benefits that can help reduce your tax liability.

To further enhance your tax efficiency, consider asset location. Asset location helps you be tax-efficient by placing tax-inefficient investments, like bonds, in tax-deferred accounts and tax-efficient investments, like stocks, in taxable accounts. This strategic placement can reduce your tax burden and boost your after-tax returns.

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¹The amount you can contribute to a traditional (or Roth) IRA depends on your income and IRS limits.

²Withdrawals from a Roth IRA are tax-free if you're age 59½ or older and have held the account for at least 5 years; withdrawals taken prior to 59½ or 5 years may be subject to ordinary income tax or a 10% penalty tax, or both. The 5-year holding period for Roth IRAs starts on the earlier of: (1) the date you first contributed directly to the Roth IRA, (2) the date you rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA, or (3) the date you converted a traditional IRA to the Roth IRA. If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately.

³Tax-loss harvesting involves certain risks, including, among others, the risk that the new investment could have higher costs than the original investment and could introduce portfolio tracking error into your accounts. There may also be unintended tax implications. We recommend that you consult a tax advisor before taking action.

⁴We recommend that you consult a tax advisor if you have questions about your tax-filing status. Additionally, Vanguard Digital Advisor considers your personal circumstances to determine which of the available tax strategies best fits your personalized investment plan.

All investing is subject to risk, including the possible loss of the money you invest.

Vanguard does not provide tax or legal advice. This information is general in nature and should not be considered tax or legal advice. We recommend you consult with a tax or legal advisor about your individual situation.

Although tax-exempt mutual funds usually produce lower yields, you generally don't have to pay federal taxes on earnings from tax-exempt money market and bond funds.

Although the income from municipal bonds held by a fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes, as well as to the federal alternative minimum tax.

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