Year-End Tax Planning for High Net Worth Individuals in 2025

Looking for smart 2025 year-end tax moves? With the One Big Beautiful Bill Act reshaping tax deductions, charitable giving, and the SALT cap, high net worth individuals have a rare window to optimize before December 31. Here’s what to know about the coming tax changes.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. It’s been nearly 8 years since the last big tax law change, and this year’s reforms provide many significant tax-saving opportunities, as well as some tax traps. So, year-end tax planning, important in normal times, is even more crucial.

This article will help you assess your overall situation and, if appropriate, implement a few tax-saving strategies before December 31.

Tax Planning Strategies

Tax planning involves paying attention to two years at once: this year and next year. You can reduce the total tax you pay over both years by strategizing the acceleration or deferral of income and deductions. If you have a choice, it’s generally best to push income into next year, and take deductions this year.

These itemized deductions offer the most flexibility:

• Mortgage Interest – Make your January mortgage payment in December and take an extra month’s interest deduction this year.
• Donations to Charity – Deduct payments in the year you mail your check, charge your credit card, or contribute to a donor-advised fund (DAF).
• State Taxes – Pay state and local taxes due in 2026 in December 2025 (see below for how AGI may affect this strategy).

Charitable Gifts

This is one of the few provisions that will change on January 1, 2026. For folks who have high income and who give significant dollars to charity, tax planning can be extremely valuable. Starting in 2026, there’s a floor for deducting your charitable contributions, limiting your write-off to the extent those donations exceed 0.5% of your adjusted gross income (AGI). Bunching charitable deductions into 2025 by making both 2025 and 2026 contributions before the end of December could significantly benefit you.

Let’s look at an example of how the new tax law will work in 2026.

AGI =$1 million

Haircut (0.50%) = $5,000

You must contribute at least $5,000 to get a benefit, which begins after the $5,000 is reached. In the above example, if you donate $15,000 annually to charity, you’ll only get to deduct $10,000 in 2026 ($15,000 less $5,000). So, if you contribute $30,000 in 2025, you’ll get the full $30,000 charitable deduction. A donor-advised fund is a great way to implement this giving strategy (see below). 

Note that the deductible limit on cash donations is 60% of AGI, while capital gain assets, such as stock, are limited to 30% of AGI.

Donor-Advised Fund (DAF)

A donor-advised fund is an excellent tool to help you maximize your charitable benefit over multiple years, especially if your income is changing from year to year. It’s also especially helpful in 2025. You’ll get an up-front deduction when you make the contribution, but you have an unlimited number of years to make the actual grants to your favorite charities from the fund. Appreciated securities work well with this and other charitable vehicles, as you can avoid capital gain and get a deduction for the full fair market value of the property. Some charitable planning strategies require several weeks to implement as asset transfers are involved, so make sure that you start planning early if this strategy interests you.

Using a DAF is a great way to get a current-year deduction while giving to your favorite charities over multiple years. In the example above, where $15,000 goes to charity annually, a $30,000 contribution to a DAF in 2025 would produce a full $30,000 tax deduction (there will be no 0.50% hurdle this year), with the ability to make $15,000 grants to charity in 2025 and 2026.

If you are funding more than two years of contributions, keep in mind that the donor-advised fund custodian charges an administrative fee you should consider as part of the overall planning strategy; for example, an annual fee imposed by the DAF custodian of 0.60% paid for 12 months will negate the benefit of avoiding the 0.50% haircut. However, if you’re in a high bracket this year with the expectation of a lower bracket in the future, paying that fee may save more tax dollars and outweigh the DAF admin fee. You also have flexibility about the timing of your DAF grants. The calculation is complex, and your advisor can assist. 

Selling Stock to Lock in Losses

Taking or “harvesting” capital losses now is a sure way to offset gains realized this year, or to stockpile losses for future years. Capital losses in excess of capital gains can reduce other income by $3,000; any excess loss is carried forward for use in a future year. Remember that if you sell stock at a loss, the wash sale rules bar deducting a loss on a security when a virtually identical one is purchased within 30 days of the sale.

Gifts to Individuals

The annual gift tax exclusion is $19,000 per person, both in 2025 and 2026. You may give $19,000 to any one individual this year, and married couples can give $38,000 to any one person. You won’t owe tax unless your lifetime taxable gifts (above the annual gift exclusion) exceed $13.99 million. In 2026, the lifetime exemption increases to $15 million.

State and Local Tax (SALT)

High earners in high-tax states such as California and New York will benefit from the increased SALT deduction cap, which rose in 2025 from $10,000 to $40,000. SALT deductions include items such as property taxes and state income tax. Note that the new $40,000 SALT deduction cap phases out at modified adjusted gross income (MAGI) of $500,000 for joint filers ($250,000 for singles). Fidelity has a thorough summary of this provision here.

Tax Payments and Withholding

You may pay tax withholding through payroll, pension, or required minimum distributions (RMDs), and it is assumed to be paid evenly throughout the year. You can avoid tax penalties and interest as long as you pay your taxes through withholding by December 31. 

If your employment status has changed this year or you’ve had a windfall, your withholding may be too low, and you may be subject to tax penalties. Consider a tax projection if you’ve experienced any of the following:

• Sold or vested in restricted stock (RSUs), sold stock option shares, or employee stock purchase plan (ESPP) shares
• Exercised stock options
• Changed jobs
• Received severance pay
• Received a bonus
• Accumulated unrealized losses in a taxable investment account
• Earned income from a consulting engagement

If you are making quarterly estimated tax payments, your fourth quarter payment is due on January 15, 2026. However, by paying your state tax by December 31 of this year, you may be able to reduce your federal tax. Conversely, if you have been making estimated tax payments but have earned less income this year than you anticipated, you may not be required to make the fourth quarter federal and state tax payments.

Retirement Plans

If you participate in a deferred compensation plan or have IRAs or other retirement plans, maximize your contributions. Doing so serves to lower your taxable income, allowing your investment to grow tax-free until withdrawal. If you have the option of contributing to your employer’s plan, elect the maximum contribution, and contribute as much as you can afford (pre-tax and after-tax if the plan allows). If you are self-employed, consider setting up a profit-sharing plan or SEP-IRA plan. Profit sharing plans must be established by the end of the calendar year, even though contributions are allowed until the due date of your tax return. You can open and fund a SEP-IRA up until the due date of your return.

Roth IRA Conversion

You may want to convert your IRA to a Roth IRA to take advantage of future tax-free growth in the account. Of course, income from the conversion will be taxed in the conversion year. See our Roth IRA Conversion article for more information.

Deductions for the Self-Employed

If you have your own business, you have many ways to reduce your income taxes. Here are a few items that may provide tax deductions:

• Self-employed health insurance premiums
• Home office expenses
• Business use of your car
• Purchased assets, such as supplies, computers, furniture, cars
• Expenses incurred for producing income, even if you have not yet received income

Medicare

If you file jointly and have MAGI over $212,000 ($106,000 for singles), you pay higher monthly premiums for Medicare parts B and D than folks who have lower income. The reporting on your 2025 tax return directly affects your monthly premium two years in the future, in 2027. Consider this before taking more income in 2025.

Conclusion

The OBBBA permanently extends most tax provisions of the 2017 tax law that were set to expire after 2025. While in normal times, year-end tax planning can help you save taxes and avoid surprises, especially if you’re in a high tax bracket, it’s especially crucial now, when the law is changing.

Work with your Mission Wealth Advisor or tax professional to evaluate which strategies best fit your situation, or contact us to get started.

About the Author

Joyce L. Franklin, CPA, CFP® is a Partner and Senior Wealth Advisor at Mission Wealth. She advises employees and executives in tech and human resources on wealth management, tax, and financial planning. She designs, implements, and monitors financial plans, coordinating each client’s goals, values, and risk tolerance.