Now that December has arrived, you likely have a year-end financial review marked on your calendar. Better block out extra time — this typically routine task is far more urgent this year.
Recent tax legislation, including the One Big Beautiful Bill Act (OBBBA), has made the process of figuring out deductions and other tax breaks much more complex.
You are also contending with a lofty stock market that is looking increasingly risky, a looming surge in health care costs and nonstop economic developments.
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That all makes it especially important to take a clear-eyed look at your financial picture before the clock runs out on 2025 to ensure you’ve taken full advantage of money-saving opportunities, avoided potential tax land mines and put yourself in the best position for 2026.
Consider, for example, the potential impact of the OBBBA. Signed into law in July, the legislation’s many provisions include a more generous standard deduction, a bonus deduction for older taxpayers and other valuable tax breaks.
But some of these deductions have income limits, so you may need to take steps before the end of the year to make sure you don’t run afoul of them and lose the potential write-off.
The OBBBA also ends some other deductions, so you’ll need to move fast to claim them.
Rising health care costs may pose one of the biggest challenges you’ll face in 2026, so the stakes are higher than usual for choosing coverage during this year’s open-enrollment season.
Many Affordable Care Act enrollees could see huge increases in their premiums following the scheduled expiration of a subsidy for marketplace plans at year-end. Lawmakers have yet to pass legislation that extends the subsidies.
Premiums and out-of-pocket costs will also climb for those relying on employer and Medicare coverage, with some plans changing benefits and others closing down.
Those are just a few of the developments that will require your attention and planning before December 31.
“There are a lot more moving pieces to consider, as well as new opportunities you don’t want to miss,” says Marguerita Cheng, a certified financial planner in Gaithersburg, Md.
Here are the steps financial advisers suggest you take now.
YOUR INVESTMENTS
It has been a volatile year for stocks, with a tariff-induced spring swoon followed by a series of record highs that have left the S&P 500 index up nearly 15% for the year so far. (Returns are through September 30 unless otherwise noted.) That head-spinning action suggests a reset is in order before 2025 ends to reduce risk and taxes on gains.
Fix your mix by rebalancing
Chances are good that your portfolio is seriously stock-heavy, following not only this year’s big jump in equities but also outsize gains over the past three years, with the S&P 500 returning an annualized 24.9%.
Meanwhile, bonds have lagged, up an average 4.9% a year over the same period. “If you started out with a 60-40 stock-bond asset mix, and you haven’t rebalanced for a few years, you may have a 75-25 mix now,” says William Bernstein, co-founder of an investment firm and author of The Four Pillars of Investing.
If you’re inadvertently invested more aggressively than you intended, restore balance by shifting some money from high-flying stock funds to fixed-income investments that have underperformed — something you can do in tax-sheltered accounts such as 401(k)s and IRAs without incurring taxes on big gains.
While you’re at it, further reduce risk by making sure you’re also adequately diversified between U.S. stocks and international markets, which, after years of lagging, are having a resurgence.
Over time, a well-diversified portfolio will dampen risk, smooth your returns and ensure you’re exposed to whatever corner of the market is working at any point in time.
Take some gains in taxable accounts
Depending on your income, you might also consider selling some winning investments in taxable accounts.
“With the market hitting new highs, it makes sense to harvest those gains, especially if you qualify for a low capital gains rate,” says Jay Abolofia, a CFP in Waltham, Mass.
In 2025, the long-term capital gains tax rate is 0% for married couples filing jointly with annual taxable income up to $96,700 ($48,350 for singles). You will pay 15% if your joint income is $96,701 to $600,050 ($48,351 to $533,400 for singles); beyond those thresholds, the long-term capital gains rate is 20%.
Use losses to offset gains
Sure, it’s tough, but not impossible, to find clunkers in this market — shares of CarMax, UnitedHealth or Victoria’s Secret, anyone?
If you have a few dogs in your portfolio, you can sell them and use those losses to offset gains and lower your tax bill.
If you have more losses than gains, you can deduct up to $3,000 of excess losses to offset ordinary income. Losses above that amount can be carried forward to future years.
Beware of fund tax bombs
Don’t defeat your efforts to trim your 2025 tax bill by investing at the wrong time, says Abolofia. That could happen if you put money in a fund prior to its ex-dividend date, which is when funds pay out dividends and capital gains that have built up during the year. (Those dates are often announced in November and December.)
If that happens, you’ll pay taxes on gains you didn’t receive.
Before investing, call the fund company or check its website to get the date of year-end distributions so that you can time your purchase accordingly.
A few funds may make hefty distributions, perhaps 10% or more, if they’re taking gains after a market run-up.
YOUR RETIREMENT ACCOUNTS
New opportunities to ratchet up savings in your 401(k) require quick action to take full advantage before the end of the year.
Meanwhile, the complicated rules that require some people to make mandatory withdrawals from certain retirement accounts by December 31 have gotten even trickier to navigate, courtesy of the OBBBA.
Save to the max
This year saw the introduction of a super catch-up contribution for retirement savers who are between the ages of 60 and 63, under a provision of the SECURE 2.0 Act. If you’re in this age group, you can stash an additional $11,250 in your 401(k), for a total allowable contribution of $34,750 in 2025; by contrast, the regular catch-up contribution for everyone else 50 and older is $7,500, for a total of $31,000.
Employers aren’t required to offer this souped-up option, though, and some who plan to may not roll it out until 2026.
“Be sure to check with your benefits department if you’re in that age window,” says Rob Austin, head of thought leadership at benefits firm Alight Solutions.
No matter your age, if you aren’t already maxing out contributions to your employer’s 401(k), 403(b) or 457(b) plan, there’s still time to ramp up before the December 31 deadline.
In addition to bolstering your financial security in retirement, money you stash in pretax plans now will trim your taxable income, reducing your 2025 tax bill and possibly helping you qualify for tax breaks under the OBBBA.
The contribution limit this year if you’re younger than 50 is $23,500, up from $23,000 last year.
Manage RMDs carefully
Although the rules for taking required minimum distributions (RMDs) have not changed for 2025, those withdrawals can have unintended consequences, especially if you’re just getting started or might qualify for valuable new tax breaks that have income limits.
For first-timers — anyone who turned 73 this year — the deadline for taking your first RMD for 2025 is April 1 of next year, vs December 31 for everyone else subject to them. But you will then need to take another distribution by the end of 2026.
To avoid the double hit next year, consider taking that first RMD before December 31, 2025. Otherwise, says Henry Grzes, lead manager of tax practice and ethics at the American Institute of Certified Public Accountants (AICPA), a trade group, “depending on your income, the double withdrawals could push you into a higher tax bracket for the year and make you ineligible for some of the new OBBBA tax deductions.”
If you’re already taking RMDs, be sure to make this year’s withdrawal by December 31. If you don’t, you will pay a penalty of 25% of the amount you should have taken out. (If you correct the problem within two years, the penalty may drop to 10%.)
If the distribution will push you into a higher tax bracket or raise your income above the limits for certain OBBBA tax breaks and you don’t need the money, consider making a qualified charitable distribution from your IRA.
QCDs fulfill your RMD requirement, and while not deductible, the amount you donate will be excluded from your taxable income, possibly keeping you within the limits for income-based breaks, such as the new deduction for older taxpayers.
Make withdrawals from inherited IRAs
If you inherited an IRA after 2019 from your mom, grandpa or cousin, you may now be on a tighter schedule to withdraw money from the account than you realize.
Under the 2019 SECURE Act, IRAs inherited after 2020 from anyone other than your spouse must generally be depleted within 10 years of the original account owner’s death. (Before the SECURE Act, you could stretch withdrawals over your own life expectancy.)
If the owner was required to take RMDs at the time of their death, however, you must generally make annual withdrawals over 10 years based on your life expectancy.
Many people who inherited IRAs after the SECURE Act passed delayed taking RMDs because the IRS waived penalties — 25% of the required withdrawal — while the rules were being finalized. That grace period ended this year.
“You may want to withdraw more than your RMD amount to avoid a big tax bill in year 10, especially if you waited till now,” says Ed Slott, CPA and president of Ed Slott & Co., an IRA distribution firm.
With an inherited Roth IRA, the same RMD and 10-year rules apply, but withdrawals are tax-free, if the account is at least five years old.
YOUR TAXES
To make sure you’re eligible for generous new deductions under the OBBBA, you might need to do some fancy footwork before year-end to bring your income within the necessary thresholds — or just move quickly to take full advantage.
Take steps to qualify for expanded deductions
One of the signature provisions of the OBBBA is the new tax deduction of $6,000 for single taxpayers who are 65 or older, or $12,000 for married filers who both qualify, effective for 2025 through 2028.
That’s on top of the standard deduction, which is $15,750 for singles or $31,500 for married couples filing jointly this year, and an existing deduction for older taxpayers of $1,600 per person.
Added together, older married couples filing jointly could get a total deduction of $46,700 this year. A bonus: You can claim the new tax break whether or not you itemize.
But not all older taxpayers qualify. The new deduction phases out for single filers with a modified adjusted gross income of $75,000, or $150,000 for joint filers. And it disappears once you hit a MAGI of $175,000 for singles or $250,000 for couples.
The expanded state and local tax (SALT) deduction — up to $40,000 for 2025, compared with $10,000 last year — also has an income limit, albeit more generous. The full SALT deduction, which includes state income, property and sales taxes, phases out at a MAGI of more than $500,000 and reverts to $10,000 for anyone making more than $600,000.
Given how big these write-offs are, it can make sense to pursue last-minute strategies to lower your income enough to qualify, says Pam Ladd, senior manager of personal financial planning at the AICPA.
If you’re still working, increasing pretax contributions to retirement plans and health savings accounts (HSAs) can help. Maybe you can postpone a bonus until next year, prepay your deductible first-quarter 2026 property taxes if allowed or, for itemizers planning charitable giving, make a large deductible donation this year.
Also, avoid moves that inadvertently increase your income enough to disqualify you from or reduce the value of these tax breaks.
To the extent that you have discretion, be careful about withdrawals from retirement plans, and carefully weigh the pros and cons of a Roth conversion before moving forward with one (see the next move).
Be cautious with Roth conversions
The rationale for doing a Roth conversion is more complicated this year. With this strategy, you shift money from a traditional IRA funded with pretax income to a Roth funded with after-tax income, which creates a bigger pool of tax-free money for you to enjoy in retirement.
The problem is, by pulling money from the traditional IRA, you may raise your taxable income significantly, disqualifying you for key OBBBA tax breaks.
“Once you get above certain thresholds, you may lose deductions and end up paying a higher amount of taxes,” says Ben Henry-Moreland, a CFP and enrolled agent at Kitces.com.
To keep your income under phase-out thresholds, you could spread out smaller conversions over several years instead of making the switch all at once, says Henry-Moreland.
Or time your conversion to a year when your tax rate is lower, perhaps when you have retired but haven’t yet started taking Social Security benefits or RMDs.
Grab the energy credit while you can
If you move fast, you may be able to claim the Energy Efficient Home Improvement and Residential Clean Energy tax credits, which end on December 31.
They provide a credit of up to 30% of the cost of energy-efficient windows, heat pumps or other improvements, within certain limits. If the fixes are installed and operational by then, you can claim those credits.
Nab a state tax break
Want to set aside money to help pay tuition and other costs for a college-bound child or grandchild and trim your state tax bill at the same time?
Contribute to a 529 savings plan on their behalf before year-end. More than 30 states and Washington, D.C., provide a state tax deduction or credit for 529 plan contributions (usually to your own state’s plan), says Mark Kantrowitz, a college savings expert and author of How to Appeal for More College Financial Aid.
Money saved in these plans grows tax-free, and withdrawals are tax-free if used for qualified expenses. If the account is parent- or student-owned, the impact on federal aid is modest, with only up to 5.64% of its value counted. Grandparent-owned accounts are no longer reported on the federal financial aid form at all.
Make a date with a tax pro
Given how complicated some tax considerations are this year, it may make sense to meet with a tax adviser, such as an enrolled agent (someone who has passed IRS-approved training) or a certified public accountant, before December 31 to help you make the right choices.
Find credentialed pros via the IRS directory of federal return preparers.
YOUR HEALTH CARE
Brace yourself for a sharp rise in costs next year, whether you’re covered by an employer health plan, an Affordable Care Act policy or Medicare. The higher costs make your choices during this fall’s open-enrollment season all the more critical.
Weigh new employer insurance options
Employees are likely to see the biggest jump in what they pay for health insurance in 15 years, as companies face a jump in their own costs of as much as 6.5%, according to Mercer, a benefits consultant.
“You can expect employers to pass along a share of those costs to employees through higher deductibles and out-of-pocket maximums, as well as premium increases,” says Beth Umland, Mercer’s director of employer research for health and benefits.
That means it’s imperative to compare offerings during your employer’s open-enrollment period, including new options that may be more affordable than the plan you’re on now.
More than one-third of employers have introduced new types of coverage or plan to in 2026, Mercer found, often including one option with a lower deductible, or even none.
Some firms will also be offering a “high-performance” plan that has a more limited range of providers with lower deductibles.
“The plan may limit you to one or two hospitals but may still offer high quality,” says Umland.
Explore different tiers for marketplace coverage
If you get health insurance through the Affordable Care Act marketplace, you’re likely to get slammed with especially steep premium hikes during the open-enrollment period that runs from November 1 to December 15 for coverage beginning January 1.
The median proposed increase is 18% for 2026, more than twice last year’s 7% jump, according to KFF, a health-policy research organization.
In the past, many ACA enrollees have qualified for an enhanced tax credit that capped premiums at a certain percentage of income based on a sliding scale, but that credit expires at year-end, barring a last-minute congressional fix.
As a result, some enrollees will see premiums soar more than 100%.
Premiums for bronze plans, the lowest rung of the marketplace’s four-tier coverage system, will likely be more affordable than popular silver plans, though deductibles and co-payments may be higher.
You can get help comparing costs for the tiers of coverage and offerings within tiers from an ACA navigator, who is trained to offer free, unbiased assistance to consumers, via HealthCare.gov or your state marketplace.
Federal funding for this service has been reduced, so get your call in soon to avoid a long wait.
Look into Medicare plan changes as well as costs
Nearly seven out of 10 Medicare beneficiaries don’t compare plan options during open enrollment (October 15 to December 7), a KFF study found. Don’t be one of them, especially this year, with costs for 2026 expected to rise sharply for Part B premiums, some Part D prescription-drug coverage and some Medicare Advantage and medigap plans; plus, several insurers are scaling back plans and benefits or exiting certain markets.
Start with the Medicare.gov Part D plan comparison tool; enter all the medications you take to see the costs charged by plans in your area. If you’re in a Medicare Advantage drug plan, you can use the Medicare.gov Part C tool to compare drug costs and other benefits. For individual guidance in shopping for a Medicare plan, reach out to shiphelp.org.
Appeal your Medicare surcharge
Medicare beneficiaries are often notified late in the year if they will pay a surcharge on their Part B and Part D premiums for the next year’s coverage.
This income-related monthly adjustment amount, or IRMAA, is based on the income you reported two years prior, so your 2024 tax returns will determine what you’ll pay for 2026.
The 2026 IRMAA will kick in if your income is more than $218,000 for married couples filing jointly, and your Part B premiums could range from $284.10 to $689.90 a month, compared with $202.90 without the surcharge, as well as an additional $14.50 to $91 a month on top of your Part D premium.
If you get an IRMAA notice and your income has dropped considerably since 2024 because of a life-changing event — say, you retired or your spouse died — you can appeal to have the surcharge lowered or dropped.
To do so, file Form SSA-44 and provide proof of the change in your income. If you’re successful, your premiums will be adjusted.
Spend down your FSA
About two-thirds of employers require you to use up the funds in your health care flexible spending account by December 31 or forfeit the money. (The rest offer a grace period until March 15 or allow you to roll over a portion to the next year.)
If your company is among them and you have money left in your account, better start spending it now. The accounts allow you to use tax-free money to pay health insurance deductibles, co-pays and a long list of other out-of-pocket health costs, from aspirin to stop-smoking programs (you can find qualifying items at the FSA Store website).
If you’re looking to spend a sizable amount quickly, consider higher-priced items, such as prescription eyeglasses and hearing aids.
SMART STEPS TO TAKE FOR 2026
Once you’ve finished your year-end planning, set yourself up for the new year with these moves.
Adjust your withholding
While you’re at it, recalculate your estimated tax payments, too. The start of the year is always a good time to revisit how much tax is taken out of your paycheck, Social Security benefits or IRA withdrawals, but it’s especially important for 2026, if the OBBBA is likely to change what you owe Uncle Sam — say, if you’ll qualify for the new deduction for older folks or pay high property taxes.
Use the IRS withholding estimator tool to come up with the right amount, then file a new W-4 form with your employer. Retirees can change their Social Security withholding at the SSA website.
Reset your retirement account contributions
Next year, retirement savers can take advantage of increased contribution limits for both regular and catch-up savings for people 50 and older.
But few people actually save that much: Only 14% of participants maxed out their regular contributions last year, and just 16% of eligible savers set aside the maximum allowed for catch-up contributions, according to Vanguard.
A key reason is inertia, as many savers stick with their default contribution rate, often 6% or less.
So dial up your savings in January, which will give you a better shot at maxing out. Or sign up for automatic escalation, offered by two-thirds of 401(k) providers, which will raise your savings rate by, say, 1%, a year until you hit the limit.
Guard against fraud
Consumers lost more than $12.5 billion to fraud in 2024, up 25% from 2023. And fraud losses are likely to keep rising following the recent exposure of Social Security data, which included the personal information of hundreds of millions of Americans, including Social Security numbers, addresses and birth dates.
To protect yourself, put a free credit freeze on your accounts via the three major credit-reporting companies, Equifax, Experian and TransUnion; use malware protection on your devices; set up alerts about transactions on your financial accounts; and be wary of texts, calls and e-mails asking for account data or sending you links to click.
Find more tips at the nonprofit Identity Theft Resource Center.
MAKE SURE YOUR GENEROSITY PAYS OFF
If you’re donating to your favorite charities during the holidays and hoping for a tax break, too, you’ll want to carefully consider your timing, thanks to new rules established by the OBBBA.
If you’re among the roughly 90% of taxpayers who do not itemize, for instance, you may want to delay your gift until January or later. In 2026, for the first time in years, you won’t have to itemize to get a charitable deduction. The maximum write-off: $1,000 for single taxpayers and $2,000 for married couples who file jointly.
On the other hand, if you itemize, you will get a bigger tax break if you donate this year, before new limits on the amount you can deduct take effect.
Starting in 2026, itemizers will be able to write off only the portion of their contribution that exceeds 0.5% of their adjusted gross income. So, if your AGI is $150,000 and you donate $1,000, you can deduct only $250 next year.
In 2026, there will also be a 35% cap on the total amount of itemized deductions for those in the top tax bracket (income higher than $640,600 for singles or higher than $768,700 for joint filers), which means they will not get a dollar-for-dollar value for their deductions.
“Higher earners may want to bunch up their donations and make them this year to get a bigger deduction,” says Adam Grossman, an investment adviser in Newton, Mass.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
