Year End Tax Strategies for 2025

Shawn (00:00): Whereas people who have the majority of their wealth and income actually from working or running a business, yeah, they pay way more than their fair share, I would argue. Anyways. Welcome back to another episode of Christian Financial Perspectives. My name is Shawn Peters. I’m joined today by Bob Barber, my co-host, father-in-law, and the one who usually writes the overall outline for these episodes. So if they turn out great, you’re welcome to leave a comment in there thanking me for it. If they’re not great, then well, Bob, you’re the one that wrote it so well. I couldn’t decide. Bob (00:39): Today is always a good one we do because we’re going to be doing annual year end tax strategies. Shawn (00:45): And believe it or not, Bob does have to update this each year because… Bob (00:48): Every year. Shawn (00:49): The IRS does try to earn their keep to an extent and they like to make changes every now and then. Of course, then you’ve got congress, it’ll make changes sometimes. So I would love it if we could just kind of repeat this each year for our listeners and viewers, but nope, got to go through all of ’em, make sure they’re correct and up to date, especially for tax stuff. So our tax strategies for year end of 2025, and Bob, what do you want to start us out with on this? Bob (01:16): Well, I want to first say if you’re interested in saving possibly one, two, or $3,000 in taxes, this might be very valuable information for you in the next 12 to 15 minutes. These are year end strategies that we’re going to give, so we always do this in December, but you’ve got to do these before the end of the year. If you wait, you cannot do the ones that we’re going to give today in January. They have to be done, and Shawn, the number one reason for financial problems is procrastination. Shawn (01:49): It’s not a “high enough return.” I thought, I’m just kidding. Yeah, procrastination. Bob (01:54): I understand and people just procrastinate, but this is something you cannot procrastinate on if you want to save some money on taxes, and we’re going to give some of these, you don’t even have to worry about your itemized deductions because it just comes under the realm of right off the top of your income and this year… Shawn (02:14): Again, then the key is the strategies that we’re going to be covering today, make sure that if you’re going to take advantage of them, that you complete it by December 31st, and in some cases, depending on what it is, there’s a little bit of a lead wait even with that, because obviously we’ve got Christmas, there’s New Year’s, custodians get busy, so I would probably say target getting this done by around December 15th, December 20th at the latest just in case. Then once you roll into that new year, you may not have followed your taxes, but it’s too late to do some of these strategies. Bob (02:44): We’ve had those phone calls on December 31st. Sorry, it’s just not enough time to do it. I think there’s a good scripture that goes with this, Shawn, and you’re my scripture reader, so. Shawn (02:52): All right, lemme put on my reading voice. Romans 13:6-7, “This is also why you pay taxes for the authorities are God’s servants who give their full time to governing, give to everyone what you owe them. If you owe taxes, pay taxes, if revenue, then revenue. If respect, then respect. If honor, then honor.” That’s a great one. Bob (03:16): Just Romans 13, that chapter of Romans 13 talks about how we are to submit to the governing authorities. You think about it and the 10 Commandments was put in place for a government and government is not bad, except when it becomes like communism. Shawn (03:34): Yeah, we’ll have to save that for another episode. Bob (03:37): Yeah, exactly. But government is put in there to run a society with wisdom and where it’s not chaotic, where it’s calm. Shawn (03:51): Yeah. One day we’ll have the, what do you call it? I believe it’s the theocracy, right? So that would be like Jesus literally reigning from Earth, which will be great. Ultimately we know he’ll always make the right decisions Bob (04:02): And hopefully free enterprise. Shawn (04:05): Yeah, we got to do the best we can with what we got for now. Bob (04:08): The one thing before we discuss any of these strategies, and we’re going to discuss I think six or seven of them, the main thing is that you understand the standard deduction, which this year is interesting with Trump’s, he calls it the big beautiful tax bill. He’s always coming up with this. Shawn (04:27): Big and beautiful. Bob (04:28): I know it. Shawn (04:29): Better and great. Bob (04:30): Yep. But the standard deduction for 2025 for a single person is $15,750. That means that’s your standard deduction right off the top. So your itemized deduction has got a total more than that. Shawn (04:43): More than that for it to be worth it. Bob (04:45): And one of the things I always want to mention with this and Don, our CPA, and Mariah’s a CPA, too, that works with us, very important that he said this. Make sure that everybody understands that tax planning should be done in multi-year increments, especially with the standard deduction so high because for a married couple for 2025, that standard deduction is $31,500 and the big beautiful tax bill added this much more for seniors. If you’re both above 65 and married, that standard deduction can go up over $46,000. Shawn (05:21): Wow. $46,700 to be exact. Bob (05:23): Yeah. $46,700 is the max. It can go as high as that. If both seniors are not 65, it won’t go that high. It’ll go to about 40k, but if both seniors are over 65, it can go to $46,700. Shawn (05:35): I do see you’ve got some notes on here that the additional bonuses for seniors does phase out with higher incomes, so it depends on how much you’re making. Bob (05:45): And I can tell you what that is. That’s around $150,000. So if a senior makes over $150,000, it starts phasing out. Shawn, I put this on the tax tables that somebody that makes 150k or under and say that about $60,000 of that is social security for both the husband and wife – 50k to 60k. You know what? Their effective tax rate’s only 3%. Shawn (06:05): Wow. Low. That’s great news for seniors. Can we see if our government can get that at least maybe under 10% for the rest of us? Bob (06:16): It would be nice. It would be nice. Mine’s at about 35%, so I guess they’ll say, well Bob, you’ll pay it. Guys like you, the wealthy don’t pay their fair share and even though you’ve been an entrepreneur for over 40 years. Shawn (06:29): Yeah, well remember Bob, that whole fallacy comes from you’ve got people that are super, super wealthy, they’re like billionaires and people think they just have billions of dollars sitting in cash in their bank account like, well, no, it’s from assets and things that they’d have to sell to getting the money. Whereas people who have the majority of their wealth and income actually from working or running a business, they pay way more than their fair share, I would argue. Anyway. Bob (06:54): Alright, so let’s go. Shawn (06:55): Alright, number one. Bob (06:56): We’re going to get through these. There’s lot of this to get through. Shawn (06:58): Yeah, stop talking so much, Bob. Year end tax strategy number one, max out contributions to company qualified plans. Bob (07:06): That’s right. So if you’re under 50, that’s $23,500 or if you’re over 50, that’s $31,000 and then there’s this weird thing between 60 and 63 years old, you can go up to $34,750. I don’t know who comes up with these numbers. Shawn (07:19): The super catchup provision. Bob (07:20): Yeah, it’s called the super catchup provision. That’s exactly right. Shawn (07:23): So if you didn’t hear that the first time 60 to 63, there’s this special super up provision that goes from instead of $31,000 it’s $34,750. Bob (07:34): So you realize if you’re putting money in your 401k, and let’s say you’ve put $20,000 in there, if there’s somehow some way before the end of this month, you could add another $14,000 to that. That’s going to save you a lot in taxes that comes right off your income. That’s the most important… Shawn (07:52): To clarify. This is to the pre-tax or your traditional, not the Roth, that many of the plans have a Roth option where you’re paying the taxes now, so make sure if you’re trying to take advantage of this, it’s for the pre-tax portion so that way it reduces your total taxable income. Bob (08:07): Most people I know they’re not putting that much money in a 401k, they may be putting $10,000 a year. They didn’t realize they could go that high. Again, if you’re under 50, $23,500, if you’re over 50, basically $31,000, that’s a lot of pre-tax dollars and that’s before your match. Shawn (08:22): Exactly. Yeah. So that’s again, not including what the company’s contributing and that would be kind of the, I guess pro tip on this one, make sure whatever your company matches – that dollar for dollar or sometimes it’s maybe 3% match a hundred percent and then the next 3% they match 50%. Well, in that case, make sure you’re putting 6% away to make sure you’re not leaving money on the table that the company is already going to contribute, so no matter how the underlying investments do, you’re getting extra money. Bob (08:49): Yeah. Shawn (08:49): Alright. Year end tax strategy number two, max out charitable contributions. Bob (08:54): Now our next program that we’re going to do in just a couple weeks from now is going to be on the donor advised fund, which is a really great vehicle that you can use. That is a great one, but you’ve got to remember with this, it’s called the 30/50/60 rule and that means you can give 30% of your income to charities, but that would be… Shawn (09:14): Your adjusted gross income. Bob (09:15): Your adjusted gross income, but that’s in non-tax if you want to give a car away. Shawn (09:20): Or non-cash assets. Bob (09:21): Yeah, exactly. Shawn (09:23): Stocks, land, cars, other valuables. Bob (09:26): But the cash you can give up the 50 to 60% of your income. Most people don’t do that, but there’s that option there. If you wanted to give that to charities, you can do that before the end of the year and we’re going to mention a donor-advised fund, like I said on our next program, which is something you can plug in a lot of money to right before the end of the year, get the tax deduction and then there’s no pressure when that actually goes to the charities. Like you don’t know I want to do that, but I don’t know what charities I want to give to. Donor advised fund – we’re going to get it in all the rules on our next program about that. It is an excellent vehicle. I’ve been using it myself for many years. Last year I did a huge donation of some stock that appreciated and I didn’t have to pay any tax on that appreciated stock either. Shawn (10:10): Basically the reason you do that is because then you can meet your tax and giving goals by the end of the year before the deadline, even if you haven’t identified the specific charity or charities that you’re going to send it to because you can’t take it back once it goes into the donor advised fund. Bob (10:28): That’s exactly right. Shawn (10:29): That’s a great one. Year end tax strategy number three, max out property taxes in this year, especially with the big beautiful tax bill. Bob (10:39): I get over that big beautiful tax bill thing. It’s so funny, but remember when you’re paying your property taxes, and I’ve emphasize again, it needs to be thought about in multi-year increments because you’ll want to load up on your property taxes in one year, but this year it’s gone from $10,000 to $40,000. So let’s say you have here in Texas, our property taxes are just outrageous. I think everybody knows about that. Shawn (11:07): But we don’t have the state income tax, so… Bob (11:10): That’s true. Shawn (11:10): It’s balance. Bob (11:10): That’s true, but I think a lot of people that moved here from California, they’re being very surprised like, oh my goodness, I get this property tax bill, which can be on a $500,000 house can be as much as $10,000 a year here in Texas, but let’s say you had a second home here in Texas or somewhere else and that totaled $20,000 in tax. Well, you can now deduct that before you could only deduct up to $10,000. Shawn (11:37): So you could deduct or you could pay and therefore deduct the property taxes from next year and this year if you do it all now, so from what you paid earlier in the year, then you got your tax bill, so pay it before the end of the year. Now you can deduct that. Bob (11:51): That’s where you double up because remember, want your itemized deductions to go over the standard deduction, which is very hard for a lot of people to do now because it’s so high. Shawn (12:02): Alright, anything else on that one? Bob (12:04): Nope. Let’s go to the next one. Shawn (12:05): Year end tax strategy number four, tax loss harvesting. Bob (12:09): We do this a lot around here. This has to do where you look at your holdings, like your stock holdings and you say, well, what’s appreciated versus is there any that have gone down in value? Because not everything goes up and you can sell your losers against your winners and that’s called tax loss harvesting. Now the one thing about it, there’s a rule in here, it’s called the wash rule, and if you do this without a financial advisor helping you or a CPA, you’ve got to realize you cannot go back in and buy that particular holding for 31 days, or a like kind holding. You’ve got to be very careful with this and the IRS is looking at these rules. Shawn (12:47): So you’ve got to make sure you move into something else for that 30 days, but we typically say, okay, just plan on purchasing it at least 31 days later to make sure you don’t run into that. Bob (13:00): Yeah. This is for people that want the holding, but they’re just like, I’m just doing this for the tax purposes. Shawn (13:04): Exactly. Bob (13:05): It’s called tax lost harvesting. It’s actually called that. You can look it up. Shawn (13:10): Alright. Alright. Year end tax strategy number five, make gifts to responsible children, grandchildren, or anyone else. Bob (13:16): You notice I say the word in there. Shawn (13:17): Responsible. I saw that. Bob (13:20): Yep, so if you have a fiscally responsible child or grandchild or someone you want to give money to, you can give up to $19,000 per person for a married couple if we wanted to give $38,000 to Rhonan this year. Shawn (13:35): Okay. Yeah. Bob (13:35): He’s kind young to be getting that….or his parents, okay. Shawn (13:39): His parents are pretty financially responsible. Bob (13:41): So Rachael and I could do that as a married couple. We could give away up to 38k. You could receive that and it wouldn’t be taxable to you. Shawn (13:47): Great. Bob (13:47): Okay. Up to 38k, you start going over that number. Shawn (13:49): Put that in the continuing education fund for the kids. Bob (13:53): We have to talk about that. Shawn (13:55): Bob, I think I can speak for Jenna on this. Your oldest, prettiest, smartest daughter. I’m not biased at all, but if you guys wanted to do that to help you with your tax issues, we’d make that sacrifice. I’d be okay with that. Bob (14:08): Sounds good. Sounds good. Alright, let’s get down to number six. Shawn (14:14): Number six, year end tax strategy number six, income timing. Bob (14:17): Yeah, this is a good one for those of you that might be thinking about retiring next year and maybe if you have a bonus that’s coming at the end of the year, ask your HR department if you can delay that bonus until next year. Shawn (14:33): Okay. Okay. Bob (14:34): What’s happening is you’re layering that on top of a higher tax bracket because the tax brackets go up in increments. Shawn (14:40): So for example, you’re retiring at the end of this year and you have this bonus coming, so if, hey, would they be willing to issue that bonus towards the end of January. Bob (14:51): That’s right. Yeah, that is a very good one. It’s always something good to do. Also, if you think you may not be getting that bonus next year, maybe half this year and half next year. Shawn (15:04): Okay. Okay. Got it. Bob (15:05): That’s what I mean by income timing. And then we’re down to our last one. Shawn (15:08): Yeah. Year end tax strategy number seven, buy business equipment before December 31st. Bob (15:11): A lot of people have a part-time business and they may work out of their home. It’s time to go buy that computer that you need to update or maybe you need to buy a new desk, but this kind of stuff is. Shawn (15:26): Or if you’re in construction or all the other things. I know for my dad with the mining and excavation and farmland stuff like well, maybe grab some new tires or maybe go ahead and buy that new service truck or something. You can get in before the end of the year. Bob (15:41): This was big for you growing up because your dad’s a farmer. Shawn (15:47): And with the excavation and minings, there always seemed to be a surplus of tires towards the end of the year because you’re going to need ’em anyway. Bob (15:53): Or a business vehicle, you could do that and the big sales always come around December 31st. They’re in the panic to make their year end quota. Shawn (16:00): Exactly. Bob (16:02): It may be a good time. Shawn (16:03): To get that business vehicle. Yeah. You go towards the end of the year and they’ll work with you. Bob (16:07): Yep, exactly. Shawn (16:08): All right, well that wraps up all seven. These are, of course there are many more year end tax strategies, but we didn’t want y’all to stick around for an hour, so we’re just going to… Bob (16:17): We didn’t want them to have to stick around for an hour. Shawn (16:18): Yeah. Oh, we’d love you to stick around. Bob (16:19): I think they might go to sleep. These tax strategies can be boring. Shawn (16:23): Yeah. Alright, well hopefully though you can save thousands of dollars in taxes for 2025 by using one or more of these year end tax strategies, but remember, all these strategies we mentioned today are ones that must be done by December 31st, so time is of the essence. Don’t procrastinate on these. Bob (16:41): And contact your CPA, your accountant, or your financial tax professional for any of these before doing them. Shawn (16:48): There may be some other particular things that you’re working with them on that I don’t know. I mean, I’m not saying that any of these are bad, but there might be something that could impact or be affected by some other strategies you’re utilizing. Bob (17:00): And it’s the third time we’re just going to say this, tax planning always should be done in multi-year increments now because of the standard deduction so high. If you want some help with this, feel free to give us a call at 830-609-6986. You can also text that number 830-609-6986, or you can go to our website www.christianfinancialadvisors.com and you can contact us through our website. Shawn (17:25): Feel free to also comment, like, all those good things depending on where you’re watching or listening to this, and until next time, God bless and we look forward to seeing you again. [DISCLOSURES] * Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors®, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors® believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.