Tax Tip Tuesday: Maxing Out Retirement Before Year-End

As the year winds down, one of the best ways to save on taxes and strengthen your financial future is by maximizing retirement contributions before December 31st. Whether you’re a W-2 employee, a self-employed business owner, or running an S-Corp, there are multiple ways to build your nest egg while lowering your taxable income.

1. 401(k) and Employer-Sponsored Plans

If you’re an employee with access to a 401(k), 403(b), or similar plan, the 2025 contribution limit is $23,000 (or $30,500 if you’re age 50 or older). Check your latest pay stub to see where you stand, and consider increasing your contributions before year-end. Employer matching doesn’t count toward your individual limit—so if your company offers a match, don’t leave that free money on the table.

2. Traditional and Roth IRAs

You can contribute up to $7,000 to an IRA ($8,000 if you’re 50 or older). Traditional IRAs may be tax-deductible depending on your income, while Roth IRAs grow tax-free and allow tax-free withdrawals in retirement. Even though you technically have until April 15, 2026, making your contribution before year-end gives your money a head start on compounding.

3. Business Retirement Plans for the Self-Employed

If you’re self-employed, own a small business, or operate an S-Corp or single-member LLC, business retirement plans can provide powerful tax savings and flexibility.

• SEP IRA (Simplified Employee Pension):Easy to set up and ideal for freelancers, consultants, and small business owners. You can contribute up to 25% of net self-employment earnings, capped at $69,000 for 2025. The plan can be opened and funded up until the tax filing deadline (including extensions).

  
  

• Solo 401(k):Designed for owner-only businesses with no employees (other than a spouse). You can contribute both as the “employee” and “employer” — up to $69,000 total ($76,500 if age 50+). The plan must be established by December 31st, even though contributions can be made until your tax filing deadline.

  
  

• SIMPLE IRA:A great option for small employers (under 100 employees). Employees can contribute up to $16,000 ($19,500 if age 50+), and employers must either match up to 3% or contribute 2% for all eligible employees.

  
  

• Defined Benefit (Pension) Plans: For high-earning business owners who want to significantly reduce taxable income, defined benefit plans can allow six-figure annual deductions while accelerating retirement savings. These require actuarial calculations but can be worth the effort for the right taxpayer.

  
  

4. Health Savings Accounts (HSAs)

If you’re covered under a high-deductible health plan, an HSA offers triple tax benefits: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. The 2025 contribution limits are $4,300 for self-only and $8,550 for family coverage, plus an extra $1,000 if you’re 55 or older.

5. Year-End Checklist

• Review your W-2 and pay stubs for current contribution totals.

  
  

• Confirm that your Solo 401(k) or business plan is established by December 31st.

  
  

• Adjust your final pay period contributions to hit your goal.

  
  

• Coordinate with your tax professional to determine what combination of plans provides the biggest deduction for your situation.

  
  

Maximizing your retirement contributions before year-end is one of the most effective ways to save for your future while reducing your current tax bill. If you own a business, the potential deductions can be even greater with the right retirement plan structure.

At MKHS Tax Group, More Knowledge and Kind Support lead to Happier Clients and Simpler Solutions—empowering you to understand more, stress less, and file with confidence. Have questions about the best retirement strategy for your income and business? Reach out to info@mkhstaxgroup.com before year-end to make sure you don’t miss out.