Talking Taxes: It’s Not Too Late to Help Reduce Your 2025 Tax Bill

It is not too late to consider strategies that may help mitigate your 2025 tax liability. The following article discusses various post-year-end strategies that could help reduce your 2025 taxes. The following are five strategies which may provide a year-end planning solution. For a more thorough discussion of each strategy and how it could impact your taxes, consider speaking with your Regions Wealth Advisor.

5 Strategies to Help Reduce Your 2025 Tax Bill

Strategy #1: Revisiting IRA, SEP IRA, and HSA contributions for 2025

Did you forget to fund your retirement account or Health Savings Account in 2025? Not to worry. Contributions to an IRA can be made until April 15 of the following year and still count for the prior year. HSA contributions may be made up to the tax filing deadline (typically April 15).

For 2025, you can contribute up to $7,000 to your IRA with an additional “catch-up” contribution of $1,000 for people aged 50 and over. In 2025, the maximum annual contribution to a HSA is $4,300 for individuals and $8,550 for family coverage. Those 55 and older and who are not enrolled in Medicare may also make an additional catch-up contribution of $1,000. In addition to these two savings vehicles, clients who own businesses can establish and fund a SEP IRA, if appropriate, on or before the filing deadline of the business tax re­turn, including extensions. The maximum contribution to a SEP IRA in 2025 is 25% of compensation, to a maximum of $70,000 per eligible employee.

The rules regarding who can benefit from each of these savings vehicles vary, so please review their efficacy for your individual situation with your tax or wealth advisor, in light of your overall financial plan.

Strategy #2: Maximizing your Flexible Spending Accounts (FSAs)

If you have a Flexible Spending Account but did not spend all the funds in your account by the end of 2025, all may not be lost. Check to see if your employer has adopted a grace period permitted by the IRS allowing employees to spend 2025 set-aside money as late as March 16, 2026.

Strategy #3: 2025 trust distributions – the “65-day rule”

Trusts pay the highest federal income tax rate of 37% at a much lower threshold than individuals ($15,650 of income versus $751,600 for married filing joint in 2025). Beneficiaries generally have a lower tax rate than a trust. Therefore, income that is distributed to those beneficiaries at a lower rate may be taxed at that lower rate. Trustees have up to 65 days into the follow­ing year to make a distribution from a complex trust that could count toward the previous year. Leveraging this opportunity, if applicable, may provide tax efficiencies when appropriate.

Strategy #4: Electing into a Passthrough Entity (“PTE”) tax

With the passing of the Tax Cuts and Jobs Act in 2017, state and local tax deductions for individuals were initially capped at $10,000 and have subsequently increased to $40,000 with the One Big Beautiful Bill Act (OBBBA) of 2025 (subject to phase-down thresholds for high-income taxpayers with modified AGI over $500,000).

It is important to note that in 2030 without an extension, these deductions will revert back to the initial level of $10,000. To ease the effects of SALT limitations on their residents, many states have enacted tax laws allowing qualified passthrough entities (generally S corporations, partnerships and LLCs) to elect to pay state taxes at the entity level rather than as a passthrough at the individual’s level. The entity is then able to deduct the entity level state taxes as a business expense and reduce the partner’s share on their K-1 for federal tax purposes.

Many states also provide the owners of PTEs a state tax credit for their share of the PTE tax or may exclude their share of the PTE’s income in computing their state income tax. States vary as to when the election must be made, so it’s important to confirm filing deadlines with your specific state. While OBBBA’s higher SALT cap narrows the PTET advantage, electing into a passthrough entity tax structure remains a useful option for high income taxpayers.

Consult with your tax advisor for state specific rules and to see if the election could benefit you.

Strategy #5: Converting into corporate entities

The new year is not just about putting together a plan for your personal life. It is also about planning for your business. The choice of entity is something business owners should constantly be reviewing. If, during your review, you realize it may be time to change your entity classification, filing the appropriate paperwork prior to March 15 allows the election to become effective as of the 1st of the year. Filing after that date causes the election to be effective as of the first day of the following tax year.

This information is general education or marketing in nature and is not intended to be accounting, legal, tax or financial advice. Although Regions believes this information to be accurate as of the date written, it cannot ensure that it will remain up to date. Consult an appropriate professional concerning your specific situation and irs.gov for current tax rules. Tax laws are subject to change, and their application may vary based on individual circumstances. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.