Even though the 2025 calendar year has ended, there are still steps you can take in 2026 that may reduce your 2025 tax liability before filing your return. These strategies cover retirement contributions, health savings accounts, pass-through entity payments, and certain disaster loss elections.
Retirement Contributions
Taxpayers can make deductible contributions to Traditional IRAs for 2025 up until the original due date of their return, April 15, 2026. Income limits apply to make a deductible contribution of up to $7,000 for 2025, with an additional $1,000 catch-up contribution available for taxpayers over age 50.
If a deductible contribution is not available, consider other options before the filing deadline. These include non-deductible Traditional IRA contributions, Roth IRA contributions, or backdoor Roth IRA strategies.
Self-employed individuals have until the extended filing deadline of October 15, 2026, to contribute to a SEP IRA or Solo 401(k) plan for the 2025 tax year. Maximizing these contributions can reduce taxable income for 2025 while supporting long-term retirement goals.
Health Savings Account Contributions
Taxpayers covered by a qualified high-deductible health plan (HDHP) can make HSA contributions for 2025 up until April 15, 2026. If contributions were not fully funded through payroll or employer contributions, additional deposits can be made to reach the 2025 contribution limits: $4,300 for self-only coverage and $8,550 for family coverage.
HSA Benefit Planning
Unused HSA funds do not need to be spent each year. Depending on your HSA provider, funds may be invested in stocks, mutual funds, or other available investment options. Some taxpayers choose to allow these funds to grow and reimburse themselves for qualified medical expenses at a later date. Others may consider transferring HSA funds to a different provider to access lower fees or a broader range of investment options. Proper planning can maximize both tax benefits and long-term growth potential.
Pass-Through Entity Election Payments
Owners of pass-through entities may deduct California Pass-Through Entity (PTE) payments in the year they are paid, provided the initial 2025 PTE payment was made by June 15, 2025. As long as that requirement is met, any additional 2025 PTE payments can also be deducted in the year they are paid. Payments made in 2026 will be a 2026 federal income deduction at the entity level but a California tax credit to the individual on their 2025 tax return reflecting the entity’s 2025 PTE election. Proper tracking of payments and timing ensures the maximum available deduction.
Disaster Losses
Taxpayers who suffered losses due to a federally declared disaster may elect to claim the loss on the prior year’s return. The loss must be claimed entirely in either the prior year or the current year and cannot be split across years. Making this election may accelerate a refund and improve cash flow when it is needed most.
Next Steps
Each taxpayer’s situation is unique, and not all strategies may apply. Reviewing these options with a qualified tax advisor can help determine which actions provide the greatest benefit and ensure compliance with IRS and state rules.
If you would like to discuss how these strategies may apply to your 2025 taxes, our team at Aura Tax is ready to help.
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.
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