It’s that time of the year when tax documents start to appear. The 1099s, W-2s, Social Security, and pension statements all start arriving. And you might be wondering, did I overpay or underpay?
So let’s address a common misconception, that tax planning for 2025 ended on December 31. True, many moves that can lower taxes like contributing to your workplace retirement account or making charitable contributions need to happen by year-end. But there are still meaningful moves to consider that you can make until you file your return (typically on or before April 15).
If you have already started looking at your tax software and don’t like the numbers or you just like optimizing, below are four moves you can still make before you file.
1. The Traditional IRA
If you have “earned income” (this is usually wages or net self-employment income) there is a good chance you are eligible to make a Traditional IRA (individual retirement account) contribution. The ability to deduct those contributions depends on your Modified Adjusted Gross Income (MAGI) and whether you or your spouse participate in a workplace retirement plan.
If you have income from Social Security, pension, and investments, they likely will not count as “earned income.” This move is more common if you are:
- Working full-time or part-time
- Consulting
- Have a spouse who still earns wages
For 2025, the inflation-adjusted amount an individual can contribute is up to $4,300, and the family limit is up to $8,550.
2. Don’t Forget about the “Spousal IRA”
Speaking of a spouse who still earns wages, if you file a joint return, the earned income from one spouse may allow for the non-working spouse to still make a spousal IRA contribution. This works as long as the household has enough earned income. It is important to check if your spouse participates in a workplace retirement plan and your MAGI.
3. The HSA and its “Triple Tax Advantage” (Pre-Medicare)
If you haven’t enrolled in Medicare yet (including Part A) and instead have a High-Deductible Health Plan (HDHP), specifically an HSA-eligible plan, you may have access to an HSA (Health Savings Account), assuming you meet the other eligibility rules. Unlike an IRA, you do not need “earned income” to be eligible to contribute to an HSA.
Depending on your situation, an HSA may result in:
- Tax-deductible contributions
- Tax-deferred growth, and
- Tax-free withdrawals for qualified medical expenses
For 2025, the inflation-adjusted amount an individual can contribute is up to $4,300, and the family limit is up to $8,550. For those who are age 55 or older, you and your spouse can each contribute an additional $1,000 (although you each need your own separate HSA to make the $1,000 contribution).
4. The SEP-IRA
You may have “retired” from your 40+ hours a week career, but your efforts to stay busy by consulting, freelancing, or other 1099 income might allow you to contribute to a Simplified Employee Pension Plans (SEP) IRA.
While a SEP-IRA can allow for a greater contribution than a Traditional IRA, your net earnings and other factors determine the contribution amount. So, it could be helpful to speak with a tax professional to run your numbers before making a SEP-IRA contribution.
Check Your “Estimate” Accuracy
By the time you are ready to file your 2025 taxes, you might be thinking, “good, it’s done.” But before you move on to something else, ask yourself, “Did you underpay in 2025 (and get hit with a surprise or penalties)”? If yes, you may want to consider adjusting your 2026 withholdings or estimated payments. You might be able to adjust the withholdings from:
- W-4, Employee’s Withholding Certificate
- IRA distributions
- Social Security
- Pension payments
- Annuity payments
True, no one likes to overpay by thousands of dollars, but at the same time, a surprise tax bill in April is also not fun.
Taxes Are Unique so Focus on What You Can Actually Do
- If you file an extension, it is usually an extension to file and not necessarily an extension on when you have to pay (you generally owe any tax due by the April deadline).
- Not everyone has access to an HSA, so double check the rules and Medicare eligibility.
- Traditional IRA contributions are not always deductible.
- Other tax moves, like Roth IRA conversions, charitable giving, and capital gain/loss harvesting generally need to happen by December 31 (for the prior tax year).
Just remember, you likely have opportunities to adjust your taxes even after December 31, but it’s important to review how the rules apply to your personal situation.
Taking a Step Back
While last-minute tax moves can feel appealing, it usually works better to step back and look at your taxes over several years, not just one. Your goal is not this current tax year. Your goal is to have flexibility, reduce future headaches, and make decisions when you have adequate time to consider the ripple effects. When you look at several years of tax returns together, you can start to build a customized approach. And that plan can be adjusted not only as your life changes but also when tax laws change. Having a long-term perspective and plan that is regularly reviewed and updated will likely help more over the long run than focusing on any single year-end tax strategy.
A Few Questions to Think About:
Can I still make contributions to an HSA, IRA, or SEP? Was my tax bill or refund small or should I adjust my withholding? Was there an unexpected income spike and will it likely happen again?
