A Smart Tax Planning Guide for 2025: Start the New Year Off Right
A new year brings fresh opportunities to optimize your finances. With 2025 shaping up as a pivotal year for tax planning — especially with potential changes on the horizon — there’s no better time to align your strategies and make the most of every dollar. This guide outlines smart moves to help you reduce your tax bill and set the stage for financial success over the next year.
Before we begin, a note to our readers in Los Angeles who’ve been affected by the recent wildfires: The IRS recently announced tax relief for individuals and businesses in parts of California affected by wildfires and straight-line winds that began on Jan. 7, 2025. These taxpayers now have until Oct. 15, 2025, to file various federal individual and business tax returns and make tax payments.
Now, let’s talk through 10 steps you can take to make 2025 a tax-planning success:
1. Maximize Retirement Contributions
Retirement savings remain one of the most powerful tools for reducing taxable income. In 2025, contribution limits are higher than ever, so as usual, you should aim to max them out:
401(k): $23,500.
If you're age 50 to 59 or 64 or older, you're eligible for an additional $7,500 in catch-up contributions. An important note: Beginning in 2025, those between ages 60 and 63 will be eligible to contribute up to $11,250 as a catch-up contribution. This means those 50 to 59 or 64 or older will be able to contribute up to $31,000 in 2025 and those 60 to 63 will be able to contribute up to $34,750 in 2025.
IRA: $7,000 (or $8,000 if you’re 50+).
Why it matters: Lowering your taxable income now means more funds for your future, growing tax-deferred over time.
2. Reassess Your Charitable Giving Strategy
Strategic philanthropy can do more than support your favorite causes — it can also reduce your tax burden. “Bunching” donations every other year allows you to itemize deductions when they exceed the standard deduction.
New for 2025: Consider donor-advised funds for flexibility and tax efficiency, and remember to donate appreciated securities instead of cash to avoid capital gains taxes.
3. Time Your Capital Gains and Losses
Tax-smart investing is all about timing. Holding assets for more than a year reduces your capital gains tax rate, and offsetting gains with losses minimizes your overall tax burden.
Action plan: Review your portfolio for underperforming investments and consider selling them to harvest losses or appreciated assets that benefit from long-term gains rates. Better yet: work with an advisor who utilizes tax loss harvesting as part of their investment strategy and ask them to implement this strategy across your entire portfolio.
4. Unlock the Power of Tax-Free Rental Income
Renting out your property for fewer than 15 days a year lets you pocket that income tax-free. It’s a perfect strategy for those with second homes in popular vacation spots or high-demand event areas.
Pro tip: Keep a clear record of rental days and expenses to stay within the tax-free threshold.
5. Take Advantage of Health Savings Accounts (HSAs)
HSAs are the ultimate triple-tax-benefit account: contributions are pre-tax, growth is tax-free, and withdrawals for qualified expenses are tax-free. In 2025, the contribution limits are:
$4,300 for individuals
$8,550 for family coverage
Age 55+ Additional catch-up $1,000
Why it matters: HSAs are not just for healthcare — they can double as a supplemental retirement account.
6. Plan Generational Gifts
The annual gift tax exclusion allows you to give up to $19,000 per recipient tax-free in 2025. Over time, this simple strategy can significantly reduce your taxable estate.
Tip: Gifting assets with appreciation potential (like stocks) transfers future growth out of your estate, maximizing the benefit.
7. Revisit Your 529 Plan
529 plans aren’t just for education anymore. Unused funds can now be rolled into a Roth IRA for the beneficiary (up to $35,000 lifetime). This expanded flexibility makes them an even smarter choice for building multi-generational wealth.
Pro tip: Use the five-year front-loading rule to supercharge contributions while staying within gift tax limits.
8. Plan for 2026 Tax Changes Now
The estate tax exemption and other provisions of the Tax Cuts and Jobs Act are set to expire in 2026. With the exemption expected to drop significantly from $13.61 million to around $7 million, 2025 is a critical year to act.
Action plan: Work with a financial advisor to lock in today’s higher exemptions through gifting, trusts, or other estate planning strategies.
9. Evaluate Your Business Structure
If you’re a business owner, the choice between a C Corp, S Corp, or LLC could have significant tax implications. The Section 199A deduction - aka the qualified business income (QBI) deduction - for pass-through entities is set to expire after 2025, so it may be time to reassess your structure.
Your move: Review your business goals and consult with a tax advisor to ensure your entity is still the best fit.
10. Fine-Tune Your Investment Strategy
Reduce your tax burden with investments that deliver tax advantages:
Municipal bonds: Generate tax-free interest.
Dividend-producing stocks: Offer lower tax rates on qualified dividends.
Tax-loss harvesting: Offset gains with strategic sales of underperforming assets.
Takeaway: Diversify while keeping taxes in focus to maximize after-tax returns.
2025: The Year of Proactive Tax Planning
Smart tax planning isn’t just about minimizing what you owe; it’s about aligning your financial decisions with your life’s goals. At Mana Financial Life Design, we specialize in helping individuals like you craft strategies that optimize wealth today while preparing for tomorrow’s opportunities.
Let’s make 2025 your best financial year yet. Reach out if you’re ready to get started.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.