With just six weeks left until 2025, now is the time to take critical year-end tax actions to maximize savings and avoid a hefty tax bill on April 15.

From maxing out your retirement accounts to donating to your favorite charity, here are four essential year-end tax planning strategies to help you lower your tax bill.

Contribute as much as possible to your retirement account

Taxpayers should try to max out their retirement accounts by the end of the year because it can help lower your tax bill and increase your retirement savings, says Robert Conzo, CFP®, managing director and chief executive officer of The Wealth Alliance in Melville, New York.

Every dollar you contribute to an employer-sponsored retirement plan on a pre-tax basis reduces your taxable income by one dollar in the year you make the contribution. Generally, you have until December 31 to contribute to your 401(k) plan or a similar tax-advantaged retirement plan, such as a 403(b) or 457 plan.

Although the IRS adjusts the maximum 401(k) contribution amount each year, for 2024 the limit is $23,000. If you are 50 or older, you can contribute an additional $7,500, for a total of $30,500 for the year.

“With only a few pay periods remaining in the year, taxpayers should quickly take a look at their year-to-date 401(k) balances to see if they have reached the annual maximum of $23,000,” says Tomika Bullet, tax director at Windham Brannon in Atlanta.

Maybe you received a raise mid-year or started working after the year started. You may be able to add additional contributions before the end of the year to fully meet the threshold, says Bullet.

If you don’t have a retirement plan at work, consider putting money in an IRA. The maximum IRA contribution for 2024 is $7,000, or $8,000 if you’re 50 or older. You can contribute to the IRA for tax year 2024 until April 15, 2025, so you have a little extra time.

You can also contribute to both a 401(k) and an IRA in the same year, but keep an eye out income limits to deduct IRA contributions if you also have a retirement plan at work.

Harvesting tax losses

Taking advantage of harvesting tax losses By selling the losers in your investment portfolio before the end of the year, you can also reduce your taxes. Ideally, you should consider whether you could benefit from selling underperforming assets before December 31 to offset any potential capital gains.

“These losses can be realized and the securities can be repurchased 30 days later,” explains Conzo, thus avoiding wash sale rules. “By doing this, you would create a realized loss to offset future capital gains. This is especially useful if you think capital gains rates will increase in the future,” says Conzo.

Make sure you follow the rules for how to determine your capital losses. For 2024, the long-term capital gains tax rates are 0%, 15%, and 20%, depending on your taxable income and filing status. Long-term capital gains tax rates apply to assets held for more than one year and are lower than ordinary income tax rates. Short-term capital gains are taxed at ordinary income tax rates.

Using the tax-loss harvesting strategy can reduce the amount you will owe in capital gains taxes. Even if you don’t have enough realized capital gains for the tax year, you can use your losses to deduct up to $3,000 per year from your ordinary income, and carry forward unused losses in future years.

Before resorting to this year-end tax strategy, talk to your tax professional to make sure it’s a good idea for you.

Donate assets to charity

Making a year-end charitable contribution is a way to reduce your taxes while helping others. But there is a major obstacle: you must itemize your deductions to benefit from the tax advantage. This means that to reduce your tax bill, your charitable contributions along with other itemized deductions (such as mortgage interest or medical expenses above a certain limit) must exceed your standard deduction for the year. Otherwise, it makes more sense to claim the standard deduction.

However, since the TCJA nearly doubled the standard deduction and limited other deductions, far fewer taxpayers itemize because it is much more difficult for a taxpayer’s total itemized deductions to exceed the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married joint filers. An additional standard deduction is available for taxpayers age 65 and older and the blind.

If the detail works for you, consider donating appreciated assets, such as stocks, bonds or real estate, to make the most of your charitable deductions. By donating appreciated assets, you avoid paying capital gains tax and receive an immediate tax deduction based on the value of the asset at the time of donation.

But don’t forget to also consider other assets when giving. Bullet advises taxpayers to donate items like furniture, clothing and even vehicles to their favorite charity to increase their itemized deductions before the end of the year.

Fund a 529 plan for yourself or a loved one

If you or a loved one will incur education expenses for K-12 or college, consider funding a 529 plan before the end of the year.

Although there is no federal income tax deduction for 529 plan contributions, your money grows tax deferred and withdrawals are tax free if used for expenses of eligible education, such as tuition, room and board, books and supplies. And even though there is no federal income tax deduction, you may be eligible for a state tax deduction for 529 contributions to the plan.

Before funding a 529 plan, determine how much you need to contribute to the account. If you don’t use the funds for qualified education expenses, you may have to pay taxes on the investment earnings, as well as a penalty for a nonqualified withdrawal.

Bullet says that thanks to Secure Act 2.0529 plans now offer more flexibility. As of this year, unused 529 funds can be transferred to a Roth IRA for the beneficiary if specific conditions are met, such as that the funds are held in the 529 for at least five years and the 529 account has been open for at least 15 years. The maximum lifetime transfer amount from a 529 plan to a Roth IRA is $35,000.

Conclusion

There’s still time to make money moves now that will help you keep more money in your pocket come tax time. And once you make strategic tax decisions this year, don’t forget to keep a close eye on tax news in 2025. The Tax Cuts and Jobs Act (TCJA) of 2017, a massive overhaul of the tax code, set to expire at the end of 2025.

Although experts say President-elect Donald Trump and the U.S. Congress will likely expand the TCJA’s key policies, it’s unclear exactly what will happen. Conzo recommends monitoring whether or not crucial tax policies under the TCJA are extended. This way, you can continue to strategize how to save money in 2025 and beyond.