Wealth Insights

End-of-year planning to minimize your tax burden

New legislation ushers in additional ways to lower your tax bill this year.

The end of the year is rapidly approaching, and there is still time to reduce your taxes if you take the right steps. The passing of the “One Big Beautiful Bill Act” creates new ways to lower your tax bill, even for this year.

Regions Wealth Management team recently published its annual Year-End Planning Guide. Below are a few highlights as well as tips to potentially reduce your 2025 tax burden.

What’s new for 2025:

• Increase in workplace retirement plan catchup limits - Effective for plan years beginning in 2025, employees who are 60, 61, 62, and 63 years old are eligible to contribute an extra $11,250 annually as a catch-up contribution to their workplace retirement plans.
  “If you can contribute that full catch-up amount in 2025, you will be reducing your taxable income in tandem,” says Maya Brill, Senior Wealth Strategist at Regions Bank in Dallas. “However, beginning in 2026, high-income earners will have to make those catch-up contributions to a Roth 401(k), which does not reduce taxable income.”
• Inherited IRA Required Minimum Distributions (RMDs) penalties to apply – The SECURE Act, passed in 2019, eliminated the option for beneficiaries of inherited IRAs to “stretch” RMDs over the course of their lifetime and replaced it with a 10-year rule.
  “For those who inherited from an original owner that had already begun taking RMDs, the beneficiary must take RMDs over the first 9 years and fully distribute the remaining assets in year 10,” notes Brill. “From 2020-2024, the IRS waived penalties for failure to take RMDs. This grace period has come to an end in 2025, and penalties will be applied to beneficiaries who fail to take their RMDs.” She notes that the rules have not changed for spouses of the original owner as well as for IRA beneficiaries who inherited prior to 2020.
• Increased Deduction for Seniors - Effective for years 2025-2028, taxpayers 65 years and older may take an additional $6,000 deduction over and above the standard deduction. The deduction is phased out by 6% of AGI above $75,000 single ($150,000 married filing jointly).
• State and Local Tax (SALT) deduction cap increase - The new legislation increases the cap on the SALT deduction from $10,000 to $40,000.
  “This increase is effective for years 2025-2029 and reverts back to $10,000 in 2030,” says Brill. “The cap is phased down for those with MAGI above $500,000, but not below $10,000.”
• Overtime pay deduction – A new deduction of up to $12,500 ($25,000 for joint returns) is available to offset qualified overtime compensation for tax years 2025-2028. This deduction is available to itemizers and non-itemizers. The deduction begins to phase out for taxpayers with Modified Adjusted Gross Income (MAGI) above $150,000 single ($300,000 married filing jointly).
• Tips income deduction – Taxpayers in traditionally and customarily tipped industries may now receive a deduction of up to $25,000 for qualified tips. The deduction is available to both itemizers and non-itemizers but phases out for joint filers with AGI over $300,000 ($150,000 for others).
• Increased child tax credit – The “One Big Beautiful Bill Act” increases and makes permanent the child tax credit to $2,200 per qualifying child in 2025.
• Car loan interest deduction - Taxpayers can now deduct up to $10,000 of interest incurred from debt used to purchase a passenger vehicle that was assembly completed in the United States. This deduction is available for debt incurred between 2025-2028 and is phased out by $200 for every $1,000 of the taxpayer’s modified AGI in excess of $100,000 for single filers or $200,000 for joint filers.

In addition to the changes for 2025, Brill shares a few additional last-minute financial moves to consider to potentially minimize your 2025 tax bill.

1. Consider bunching your charitable contributions

   The “One Big Beautiful Bill Act” maintains the increased standard deduction levels, limiting the benefits of itemizing deductions for some. But you can maximize the value of your charitable contributions if you bunch them together.

   “Instead of making one charitable contribution this year, for example, of $20,000, and another contribution next year of the same amount, consider bunching them together and do both this year,” notes Brill. “This way you’ve given $40,000 and exceeded the standard deduction, tapping into additional deduction benefits.” Brill suggests considering doing it this year.

   “It is important to note that beginning in 2026 there is a 0.5% floor on charitable contributions, reducing the amount of benefit received.”

2. Reduce your adjusted gross income

   If you’re retired and receiving Social Security, your adjusted gross income plays a significant role in whether you have to pay taxes on those benefits. Your adjusted gross income may also affect how much you pay for Medicare.

   “In cases where you have a required minimum distribution (RMD) from an IRA, you can reduce your adjusted gross income (AGI) by making a charitable contribution directly from your individual retirement account,” says Brill. A qualified charitable contribution—up to $100,000—could significantly impact your AGI.

   “If the money goes directly from your IRA to a charity, it satisfies your RMD and isn’t included in your adjusted gross income. It’s true that you won’t receive a charitable deduction for the contribution, but you also don’t have to include the required minimum distribution in your AGI,” she says.

3. Use your annual exclusion for gifts—or lose it

   Each year, you can give other people cash or goods worth up to a certain amount and avoid owing any gift tax. For 2025, that amount is $19,000.

   You can gift the annual exclusion amount to as many people as you would like. So can your spouse, which doubles the exclusion amount to $38,000. If you give over the excluded amount to any one person, you will be on the hook for the gift tax, not the recipient.

   Just remember that the exclusion resets every year, so if you don’t use it one year, you cannot carry it over to the following year. For those making taxable gifts, the lifetime maximum (in 2025) that is covered by the exemption is $13.99 million ($27.98 million for couples). If you gift beyond the exclusion and the exemption amounts during your lifetime, then you will end up paying taxes on the excess gifts. Tax rates for gifts over the lifetime exemption is 40%.

The next step toward minimizing your tax bill

“To make the most of these strategies, talk to your Regions Wealth Advisor and your tax professional,” says Brill. Your tax professional can help you estimate which marginal tax bracket you’ll be in, and your Wealth Advisor can run cash flow projections to help you understand the financial implications of charitable contributions and gifts.

“Plan for the advising process to take anywhere from a couple of weeks to a month,” says Brill, “Be sure to have updated financial statements and salary information available to help ensure your projections will be as accurate as possible.”

Talk to your Regions Wealth Advisor about:

1. Setting up an appointment to review your income for the year.
2. What strategic charitable contributions and gifts might be worth pursuing before the end of the year.

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