The final week of the year is a strange financial time.
On one hand, everyone is focused on holidays, family, travel, and wrapping things up at work. On the other hand, this is one of the most powerful windows of the entire year for improving your financial life — especially when it comes to taxes, savings, investing, and planning ahead.
Once December 31 passes, many financial opportunities are permanently gone. Others remain open until the tax filing deadline the following spring. Knowing which is which can save you thousands of dollars over time.
This guide walks through:
• What actions must be completed by December 31, 2025
• What actions can be done between January 1 and Tax Day (April 15, 2026)
• Smart year-end planning ideas most people overlook
• How to avoid common mistakes
Whether you’re in your early career, self-employed, building wealth, or just trying to be more intentional with money, this checklist will help you finish 2025 strong and start 2026 on solid financial footing.
Why Year-End Financial Planning Matters
Taxes are one of the largest expenses most people will ever pay — often larger than housing, food, or transportation. The difference between good tax planning and no planning can easily be several thousand dollars per year.
But beyond taxes, year-end is also a natural point to:
• Review your finances
• Reset goals
• Clean up inefficiencies
• Position yourself for growth next year
Think of this week as your financial New Year’s Eve — not just closing the books on 2025, but intentionally setting the stage for 2026.
What Must Be Done by December 31, 2025
Once the clock hits midnight on December 31, these opportunities disappear forever for the 2025 tax year.
1. Harvest Capital Losses (Tax-Loss Harvesting)
If you have taxable investment accounts (not IRAs or 401(k)s), you may be able to reduce your tax bill by selling investments that are currently at a loss.
Capital losses can be used to:
• Offset capital gains dollar-for-dollar
• Offset up to $3,000 of ordinary income per year
• Be carried forward indefinitely
Example:
If you realized $5,000 in gains this year but have a stock sitting at a $4,000 loss, selling that losing position before year-end can reduce your taxable gains to just $1,000.
Important rule: Wash sale rule — you cannot buy the same or “substantially identical” investment within 30 days before or after the sale.
This must be executed by December 31 for 2025 tax impact.
2. Make Charitable Donations
If you itemize deductions, charitable donations reduce your taxable income. Donations must be:
• Given by December 31
• Documented properly (receipt or acknowledgment)
You can donate:
• Cash
• Appreciated stock (very tax-efficient)
• Household goods and clothing
Donating appreciated investments is especially powerful — you avoid capital gains taxes and still get a charitable deduction for the full market value.
3. Maximize Your 401(k) Contributions Through Payroll
Employee deferrals to a 401(k) must go through payroll and must be made by December 31.
If you’re close to the limit and can increase your final paycheck deferral, this is one of the easiest ways to reduce taxable income.
This also includes:
• Traditional 401(k) contributions
• Roth 401(k) contributions
• After-tax 401(k) contributions (if available)
Once payroll closes for the year, you cannot retroactively contribute.
4. Take Required Minimum Distributions (RMDs)
If you are subject to RMDs from retirement accounts, failure to take them by year-end results in significant penalties.
This applies if you:
• Are over the applicable RMD age
• Inherited retirement accounts subject to RMD rules
Missing an RMD triggers penalties that can be substantial.
5. Use Flexible Spending Account (FSA) Funds
If you have a use-it-or-lose-it FSA, unused funds may disappear after year-end (or after a short grace period, depending on your plan).
Eligible expenses include:
• Medical, dental, and vision costs
• Prescriptions
• Contact lenses, glasses
• Many over-the-counter health products
Check your balance and spend it if needed.
6. Finalize Business Deductions
If you’re self-employed, a contractor, or a business owner:
• Pay deductible expenses before year-end
• Purchase equipment eligible for Section 179 or bonus depreciation
• Prepay certain business expenses (if appropriate)
This can accelerate deductions into 2025 and reduce this year’s tax bill.
7. Review Income Timing (If You Have Control)
If you have control over income timing (business owners, commission earners, etc.):
• Defer income into January if 2025 was a high-income year
• Accelerate income if 2025 was unusually low
This kind of planning can smooth taxes over time.
What Can Be Done Between January 1 and Tax Day (April 15, 2026)
These actions apply to the 2025 tax year but can be completed after December 31.
1. IRA Contributions (Traditional and Roth)
You can contribute to IRAs for 2025 all the way until April 15, 2026.
This includes:
• Traditional IRA contributions (potentially deductible)
• Roth IRA contributions (after-tax, tax-free growth)
This is one of the most powerful wealth-building tools available — especially for younger investors with decades of compounding ahead.
You must designate the contribution for the 2025 tax year.
2. HSA Contributions
Health Savings Account contributions can also be made up until the tax filing deadline.
HSAs are often called “triple tax advantaged”:
• Contributions are tax-deductible
• Growth is tax-free
• Withdrawals for medical expenses are tax-free
If you were eligible for an HSA in 2025, you can still fund it until April 15, 2026.
3. SEP IRA and Solo 401(k) Contributions
If you’re self-employed or a small business owner:
• SEP IRA contributions can be made until your business tax deadline (including extensions)
• Solo 401(k) employee deferrals must be elected by year-end, but employer contributions can often be funded later
This gives business owners a unique ability to significantly reduce taxable income retroactively.
4. File Your Taxes Thoughtfully (Not Just Quickly)
Rushing your tax return can cause you to miss:
• Credits
• Deductions
• Optimization opportunities
A careful review often saves far more than the cost of tax prep.
Other Smart Year-End Financial Moves
These aren’t strictly tax rules, but they matter enormously.
1. Review Your Net Worth
List:
Assets:
• Cash
• Investments
• Retirement accounts
• Real estate
Liabilities:
• Mortgages
• Student loans
• Credit cards
• Other debt
Tracking net worth yearly creates clarity and motivation — and shows whether your financial habits are actually working.
2. Rebalance Your Portfolio
If markets moved significantly in 2025, your asset allocation may be out of balance.
Rebalancing:
• Controls risk
• Enforces buy-low / sell-high behavior
• Keeps your portfolio aligned with your goals
Taxable accounts should consider tax consequences when rebalancing.
3. Increase Your Savings Rate for 2026
A 1–2% increase in savings often feels painless but compounds dramatically over time.
Before lifestyle inflation absorbs your future raises, lock in higher savings.
4. Update Beneficiaries
Many people forget this.
Check beneficiaries on:
• Retirement accounts
• Life insurance
• Bank accounts
• Brokerage accounts
Outdated beneficiaries can override wills and cause serious problems.
5. Review Insurance Coverage
Confirm that you have:
• Adequate health coverage
• Disability insurance
• Liability coverage
• Life insurance if others depend on your income
Insurance is not exciting, but it prevents financial catastrophe.
6. Clean Up Subscriptions and Recurring Expenses
Audit:
• Streaming services
• Apps
• Memberships
• Software
Cutting $50/month equals $600/year — often for things you don’t use.
Common Mistakes to Avoid
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Waiting until December 31 to act — banks and brokerages close early.
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Forgetting the wash sale rule when harvesting losses.
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Missing RMDs.
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Overlooking employer benefits (matching, HSAs, FSAs).
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Letting the perfect plan delay the good plan — small actions still matter.
A Simple Year-End Checklist
Before December 31, 2025
☐ Harvest capital losses
☐ Make charitable donations
☐ Maximize 401(k) payroll contributions
☐ Spend FSA balances
☐ Take RMDs if required
☐ Pay business expenses
☐ Review income timing
Between January 1 and April 15, 2026
☐ Contribute to IRA
☐ Fund HSA
☐ Make SEP or employer contributions
☐ File taxes carefully
Anytime
☐ Review net worth
☐ Rebalance portfolio
☐ Update beneficiaries
☐ Review insurance
☐ Increase savings rate
☐ Eliminate wasteful spending
Final Thought
You don’t need to do everything perfectly.
You just need to do a few things intentionally — every year.
Small, consistent financial decisions compound into life-changing outcomes. The week between Christmas and New Year’s is one of the rare times where a few hours of focused effort can permanently improve your financial trajectory.
Close out 2025 with clarity, confidence, and control — and let 2026 be the year your financial plan starts working for you.
