As the year winds down, now is the perfect time to review your tax situation and take steps that could reduce your bill come filing season. A proactive review can help you make smart adjustments before the year closes — and minimize any unpleasant surprises in the spring.
1. Review Your Income
Start by comparing your income this year to last year. Even though tax rates haven’t changed, higher income can push part of your earnings into a higher tax bracket or trigger phaseouts that limit certain deductions and credits. Understanding where you stand now gives you time to plan effectively.
2. Factor in Life Changes
Major life events can significantly affect your taxes. If you’ve experienced any of the following, a review is especially important:
- Buying or selling a home
- Refinancing or taking out a new mortgage
- Marriage or divorce
- A new job or career change
- Large medical expenses
- Welcoming a child
Each of these can create new deductions or alter your overall tax picture.
3. Understand This Year’s Tax Law Updates
Recent legislation has introduced several notable tax changes for 2025. Key highlights include:
- Up to $25,000 of tip income can now be excluded from taxable income
- Up to $12,500 of overtime income ($25,000 for married couples) can be excluded
- Standard deduction amounts have increased
- A new $6,000 senior deduction
- Child Tax Credit increased to $2,200 per child
- State and local tax deduction (SALT) limit raised to $40,000
Knowing which updates apply to you can help you plan strategically.
4. Maximize Retirement Contributions
Retirement accounts remain one of the most effective ways to lower taxable income. Review your 401(k), IRA, or other plan contributions to ensure you’re taking full advantage of available limits. There’s still time to make adjustments before year-end.
5. Explore Valuable Tax Credits
Credits directly reduce the amount of tax you owe, making them especially powerful. Review these commonly available credits to see if you qualify:
- Child Tax Credit
- Earned Income Tax Credit
- Premium Tax Credit
- Adoption Credit
- Credit for the Elderly or Disabled
- Education Credits (Lifetime Learning and American Opportunity)
6. Take Action Early
The best way to avoid a surprise tax bill is to plan ahead. Waiting until the end of the year limits your ability to make meaningful changes. Review your income, deductions, and credits now — and reach out to your tax advisor if anything looks uncertain.
At Somich & Associates CPAs, we help individuals and families take a proactive approach to year-end tax planning. A quick review today could help you save more tomorrow.