Photo by Jill Wellington
It’s turkey time! Thanksgiving, of course, is the main celebration in November, featuring America’s favorite fan-tailed fowl at most family gatherings later this month.
But there also are tax turkeys we want to avoid as 2025 winds down. Here’s a mini cornucopia of five tax moves to make this November.
Bunch deductions to take advantage of itemizing. The Tax Cuts and Jobs Act (TCJA) of 2017 capped the amount of state and local taxes (SALT) at $10,000 that could be claimed as an itemized federal expense. The SALT taxes include state income taxes, property taxes, and sales taxes.
The One Big Beautiful Bill Act (OBBBA) changed that, temporarily.
For the 2025 (and 2026) tax years, taxpayers can claim up to $40,400 ($20,000 for married couples who file separately). For tax years 2027 through 2029, the cap will be increased by 1 percent per year. The cap returns to the $10,000 limit ($5,000 for married filing separately) in 2030.
The TCJA’s increased standard deductions made offset the loss of all SALT claims for most taxpayers. But some will find the increased $40,000 cap makes itemizing a better choice for their 2025 return, especially if they can pull a lot of other itemizable expenses into 2025.
When your itemized and standard deduction amounts are close, this tax strategy known as bunching, generally works best when you can shift as many allowable Schedule A claims into one year, 2025 in this case, so you can itemize, and then claim the standard deduction for the next one.
That’s what the hubby and I are doing. I paid our 2024 property bill this January, but will pay our 2025 assessment by Dec. 31. Then we’ll claim Texas’ sales taxes (no individual income tax in the Lone Star State), mortgage interest, and double up (or more) on charitable donations. Then for 2026, it’s back to the standard deduction.
Our relatively good health means we don’t have enough to add to our Schedule A tally this year, since the amount must be more than 7.5 percent of your adjusted gross income. If, however, you can claim medical expenses, you might be able to overcome the medical claim threshold by scheduling some additional doctor or dental procedures, within budgetary reason and because you need to do so soon anyway, before the end of the year.
Now, with almost two months before the 2025 tax year cutoff arrives, is the time to evaluate your deduction options and take action.
Explore expiring home energy credits. The OBBBA also ends tax breaks for several home-related energy projects. This includes elimination on Dec. 31 of relatively easy upgrades that improved a residence’s energy efficiency. Tax-favored improvements here are such things as installing Energy Star rated windows; doors; insulation; and heating, ventilation, and air conditioning equipment.
The tax credit for these energy-efficient home improvements is an amount up to 30 percent of the qualified expenditures, with a maximum total credit of $3,200. There also are separate caps on specific items.
First, there is the $1,200 tax credit for qualified energy-efficient improvements for —
- Exterior doors: $250 per door, with a $500 maximum credit
- Exterior windows and skylights: $600 maximum credit
- Home energy audit: $150 total credit
- Insulation and other items: $600 credit per item
Second is the $2,000 total maximum credit for residential energy property expenditures. This includes electric or natural gas heat pumps and heat pump water heaters, and biomass stoves or boilers meeting certain requirements. These projects are worth a total maximum tax credit of $2,000.
If you max out the energy-efficient improvements and residential property tax credits, you could offset your tax liability by a total $3,200. Note, however, that the tax credits are nonrefundable, meaning if your tax bill is less than the total maximum $3,200 credit, then it will zero it out, but you can’t get the excess credit as a refund.
Still, possibly shaving $3,200 off your tax bill is worth at least looking into making some home-related energy upgrades. So, if you’ve been thinking of making such home improvements, stop pondering and get to hiring companies that can do the job properly as soon as possible. To get the tax credit, the upgrades must be in installed and in service, not just purchased or contracted for, by Dec. 31.
Don’t waste FSA money. A medical flexible spending account (FSA) offers a great way to set aside pre-tax dollars you can spend on health care costs not covered by your insurance policy. But they have one big drawback. Many still require you to use up all of your FSA money by the end of the benefits year, which is Dec. 31 for most companies. If you don’t, then you lose the funds.
Some companies do give FSA owners a grace period until March 15 to use the money. Others allow a rollover of at least some of the accounts’ funds. Make sure you know your employer’s rules. Then spend down your FSA by the end of this year or within the grace period, to ensure that it’s not wasted.
Fine tune your Form W-4. I know, I say this a lot, but it’s an easy move. And yes, there are just a few paychecks left in 2025. But even a slight change for this short period could help ensure you get closer to the tax goal of having enough taken out via withholding so that it comes as close as possible to your eventual annual tax liability.
The Internal Revenue Service’s online withholding estimator can help you determine the correct amount. Then just give your payroll administrator a new W-4 to make the change.
Add to your nest egg. I know, persistent inflation has meant many families are facing budget challenges. But if you do have some extra dollars, consider adding to your retirement account(s). Even if you can’t afford to put in this year’s maximum $23,500 for a workplace 401(k) plan or $7,000 for an IRA, save as much as you can.
Tax-savvy readers already know you do have until next April 15 to make IRA contributions, either traditional or Roth, for the preceding tax year. But the sooner you get money into the account, the longer it has to grow tax-deferred. Or tax-free if it’s a Roth.
When it comes to workplace retirement plans, Dec. 31 is the last day you can put money for the current tax year into your 401(k) or similar plan. Get to your benefits office now to bump up your contributions for the final pay periods of the year.
If the paycheck withholding change you made per the previous November tax move puts a few more bucks into your remaining 2025 paychecks, you can simply shift that amount into your retirement savings.
