Rupa Pereira
By Rupa Pereira
As our family gears up for the holidays with lights, baking, gifts and family traditions, I can’t help but look back at the year that has been. 2025 has been quite a year – packed with anticipation, surprises, windfalls and setbacks. The US witnessed a change in ruling party while diplomatic proposals are on the table for warring nations. Tariffs reared their ugly head into a tightly interwoven economy, and its future is now in the hands of the US Supreme Court that will determine its constitutionality.
The Indian Women’s cricket team won its first ever World Cup – a team that defied the odds and realized a dream through perseverance, love of the sport and shared determination. It makes me swell with pride and optimism for women’s cricket in general!
On the domestic front, i.e. US side of things – taxes took centerstage and negotiations finally culminated in the “One Big Beautiful Bill” Act being passed on July 4th. It was a monumental step towards stabilizing growth and increasing incentives to invest and build in the United States. Personally, I’ve been on my toes with the plethora of business developments both on domestic and cross-border front.
December is also a good time to re-group and plan ahead. Like how corporations conduct financial planning and forecasting exercises, families would do well to adopt a similar approach in forward projections and comparing it with the year that has transpired. Every household has its own set of financials that can be reviewed based on life changes, such as job change, relocation, family size change or events, any of these can affect our financial picture. Year-end is a good time to fold those changes into one’s financial picture so they’re part of revised story into the new year.
Here’re a few guidelines to kickstart those discussions:
Estimating your annual income can determine thresholds for tax deductions, tax credits and if sufficient taxes were withheld for the tax year. Wages paid through W-2 have taxes withheld, however other forms of income may need estimated tax payments to avoid tax penalty.
Review your credit card statements. Do you see recurring expenses that you don’t recognize? The usual suspects – Netflix, Amazon Prime, Disney+, ESPN or your favorite sports/entertainment subscriptions. We tend to sign up and forget about these, and year-end is a good time to revisit if these still hold value they once did. Typically, household spending is higher in the month of December due to gifts for family members, schools, and service-based businesses that we patronize as well as the lure of irresistible holiday specials. While it’s hard to resist a good deal, it’s also wise to ensure that our wallet can support it and we’re not trapped into buying items that we don’t need that money that we don’t have.
The most critical spending involves benefits that reset on January 1st. These are usually tied to your employer or insurance plan. Flexible Spending Accounts (FSAs) are the classic “use-it-or-lose-it” funds. If you don’t spend the money in your FSA by the end of the grace period (usually December 31st or mid-March), you forfeit it. Review your FSA balance now. Spend the remaining funds on qualified, non-emergency expenses like:
* Prescription refills (ordering 90-day supplies).
* New glasses, prescription sunglasses, or contact lenses.
* Over-the-counter FSA-eligible items (sunscreen, first-aid kits, thermometers).
Check your healthcare spending against your annual deductible and your Out-of-Pocket Maximum. If you have met your deductible or are close to hitting your Out-of-Pocket limits, schedule all deferred medical, dental, or vision work before December 31st.
Year-end is also the time to decide if you will itemize deductions or take the standard deduction. If you are close to the threshold, you can “bunch” deductible expenses into the current year. As part of the One Big Beautiful Bill Act (OBBBA), the deduction on state and local taxes has been increased from $10,000 to $40,000 beginning 2025, so if you’re in a high-income household or pay higher property taxes that were previously capped under $10,000, you may benefit from itemizing for 2025. To further the itemized deduction, consider pre-paying charitable contributions in case that’s on your to-do list.
If you owe estimated state income taxes for the fourth quarter, you can choose to pay them in December instead of January. Pay your Q4 state tax installment before December 31st. This allows you to claim the payment as a deduction on your federal return for the current year (subject to the $40,000 SALT limit).
If you plan to donate large amounts next year but need the deduction this year to push past the standard deduction limit, pay it now. Make your charitable gifts (to qualified charities) before the last business day of the year to ensure the transaction clears and counts for the current tax year.
In addition, there may be expenses that won’t give you a tax deduction but will simplify your future financial life and reduce future costs. If you have high-deductible plans or need to pay the first premium for a new health or property insurance policy, check if paying the first month or quarter early can lock in the policy or benefit your budget next year.
If your company offers a 401(k) match, make sure your contributions hit the required threshold to receive the full employer match before the end of the payroll year. Review your final paychecks and adjust your contribution percentage if necessary. Leaving free money on the table is the biggest financial mistake of the year.
If you’re at the age whereby you’re required to take minimum distributions (RMD) from your IRA accounts, then not doing so could incur a penalty on your tax return. This applies to those that have existing IRA accounts and above the age of 73.
Your financial institution can help determine your RMD so you can avoid the dreadful penalty.
Thanks to the new tax legislation, 2025 will also be the first year where tips for service workers will be excluded gross taxable income – subject to income limits. Seniors will also be able to shelter up to $6000 in addition to the extra senior deduction, so it might be a good year-end bonus for these taxpayers.
Lastly if you have any energy efficient home-improvement projects waiting in the wings and you’re expecting to get a tax credit for doing so, know that these credits expire December 31, 2025.
December can surprise us either with a white Christmas or an El-Ninò effect or somewhere in between. Regardless, it can be a time where families gather to celebrate joyful moments and reminisce good times of 2025. It’s also a good time to close out the loose ends, take stock and be thankful for little and big things as well as await a fresh start. From our family to yours – Wishes for a Joyful New Year!
Rupa Pereira is a CFP, EA, CSLP and an Advice-Only Planner and Tax Professional based in North Carolina. She specializes in cross-border matters and all things financial planning. Contact: info@fwjplanning.com
