Tax Planning Tips for 2025: Contribution Limits, Deductions, and Smart Strategies

Tax Day arrives every year—sometimes with new deadlines, often with new rules. For most taxpayers, April 15 is the filing deadline, but smart tax planning doesn’t stop there. From retirement contributions and Health Savings Accounts (HSAs) to Required Minimum Distributions (RMDs) and deduction strategies, understanding how current tax rules affect your financial plan can help you make more confident decisions—this year and beyond.

Early tax planning gives you more flexibility, more options, and fewer surprises when filing season arrives.

What Tax Changes Should You Be Aware of This Year?

While Tax Day itself is predictable, tax rules are not. Each year brings updates that can affect your overall tax planning strategy. Under current tax law, key changes include:

• Increased standard deduction amounts
• Adjustments to retirement plan contribution limits
• Ongoing changes to Required Minimum Distribution (RMD) rules

If you reached age 73 in 2024, you are generally required to begin taking distributions from qualified retirement plans. These Required Minimum Distributions (RMDs) are typically taxable as ordinary income, except for any portion previously taxed or qualifying Roth distributions.  Because RMD rules and thresholds have changed in recent years, it’s important to confirm that distributions are calculated and reported correctly. If this applies to you, be sure RMD income is properly reported on your tax return to help avoid potential penalties.

How Do IRAs and Retirement Plans Affect Your Taxes?

Tax-advantaged retirement accounts—such as a 401(k) or traditional IRA—can play a meaningful role in managing taxable income as part of an overall tax planning strategy.

• Contributions to traditional retirement accounts are generally made on a pre-tax basis, which can help reduce current-year taxable income
• Traditional IRA contributions may be fully or partially deductible, depending on income, filing status, and workplace plan coverage
• Employer-sponsored retirement plans must be funded by the end of the calendar year, but IRA contributions can typically be made up until the tax filing deadline, creating additional flexibility for tax planning

2025 IRA Contribution Limits

• $7,000 for individuals
• $8,000 for individuals age 50 or older (includes $1,000 catch-up contribution)

Can a Health Savings Account (HSA) Lower Your Tax Bill?

If you’re eligible for a Health Savings Account (HSA), it can offer a unique triple tax advantage and serve as a valuable tool within a broader tax planning strategy:

• Contributions may be tax-deductible
• Earnings grow tax-free
• Withdrawals for qualified medical expenses are generally tax-free

You can deduct HSA contributions even if you take the standard deduction. Employer contributions may also be excluded from gross income.

2025 HSA Contribution Limits

• $4,300 for individuals
• $8,550 for families
• Additional $1,000 catch-up contribution for those age 55 or older

Did you know?

Contributions for the 2025 tax year can be made up until April 15, 2026, even though the calendar year ends December 31, 2025, giving you added flexibility when planning for healthcare costs and taxes.

2025 Contribution Limits at a Glance

Contribution limits are based on 2025 IRS guidelines. Eligibility for contributions and deductions may depend on income, plan participation, and individual circumstances.

Does Timing Matter When It Comes to Deductions?

Yes—timing can make a big difference and is a core part of effective tax planning.

With higher standard deduction amounts, many taxpayers no longer benefit from itemizing unless total deductions exceed the standard deduction. One strategy to consider is “bunching” deductions—grouping charitable gifts or other deductible expenses into alternating years to potentially exceed the threshold and maximize the tax benefit of those expenses.

You may also want to evaluate whether it makes sense to defer income to future years or accelerate certain deductions if you expect to be in a lower tax bracket down the road, such as in retirement or during a lower-income year.

For individuals with variable income or upcoming life changes, such as retirement, a career change, or a business transition, timing decisions can be especially impactful. Reviewing these strategies early provides more flexibility and fewer last-minute tradeoffs.

What Itemized Deductions Are Often Overlooked?

If you do itemize, these commonly missed deductions can add up:

Are You Tracking Small Charitable Expenses?

While larger deductions made via checks or payroll are hard to miss, the cost of stamps to mail out a school fundraiser flier or the miles driven in service of a charitable organization tend to fall through the cracks. These out-of-pocket costs can be deductible when properly documented. Small expenses add up quickly, so don’t forget them!

Are You Including Unreimbursed Medical Expenses?

Medical expenses that exceed 7.5% of your adjusted gross income can be taken as a deduction. There is a very broad list of qualifying expenses to consider, including Medicare Part B and Part D premiums, as well as certain long-term care, prescription, and out-of-pocket healthcare costs.

Keeping receipts throughout the year can make a big difference at tax time and simplify the filing process.

Avoid Common Tax Filing Pitfalls

Missing the tax filing deadline or underpaying taxes can lead to unnecessary penalties and interest. Incorporating early tax planning into your financial routine can help reduce stress and avoid last-minute decisions as Tax Day approaches.

A few helpful reminders to keep in mind:

• Filing an extension provides additional time to file your return, but it does not extend the time to pay any taxes owed
• Estimated tax payments may apply to self-employed individuals, business owners, or those with non-wage income
• Reviewing paycheck withholding early can help prevent unexpected balances due at filing time

Staying proactive throughout the year can support smoother filing and greater peace of mind when tax season arrives.

What Are the Key Tax Limits to Know for 2025?

Here are a few notable updates for the 2025 tax year that may affect your retirement and tax planning decisions:

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,500, up from $23,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remained $7,500. Participants who are 50 and older can contribute up to $31,000, starting in 2025.
• Standard deductions increased to $15,000 in 2025 ($30,000 if married filing jointly, $22,500 if head of household), which may influence whether itemizing deductions makes sense.

Tax Planning Considerations for Wisconsin and Minnesota Residents

State taxes are an important part of any tax planning strategy. For individuals and businesses in Wisconsin and Minnesota, understanding state-specific rules can help avoid surprises and identify opportunities that may not be apparent when focusing only on federal taxes.

Differences in state income tax rates, available credits, and filing requirements can all affect your overall tax picture, especially if you work across state lines, own a business, or receive retirement income such as Social Security, pension payments, or retirement account distributions.

State-specific considerations may also influence decisions around withholding, estimated tax payments, and retirement income planning. Working with a financial partner who understands tax planning in Wisconsin and Minnesota can help ensure your strategy aligns with both federal and state requirements and supports your long-term financial goals.

Ready to Talk Through Your Tax Strategy?

Tax planning works best when your accounts, income, and long-term goals are considered together. Whether you’re contributing to an HSA, navigating Medicare costs, planning retirement distributions, or simply looking ahead, our team is here to help.

We’re happy to collaborate with your tax professional to ensure your financial plan supports your tax strategy—this year and beyond.

Connect with your local Forward team to start the conversation.

^{The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.}