5 Practical Steps to Prepare for a Stress-Free Tax Season

The start of a new year brings fresh opportunities to set goals, reflect on the past, and prepare for the months ahead. It is also the perfect time to get a jumpstart on one of the year’s most critical financial milestones: tax season. Tackling your taxes early can help reduce stress, uncover potential savings, and keep you on track to meet your financial objectives.

If you are ready to make 2025 the year of confident tax preparation, here are five practical steps to help you prepare:

1. Gather Your Documents Now, Not Later

Being organized is half the battle when it comes to filing your taxes. January is a great time to start collecting everything you’ll need (noting that not all tax filing documents are readily available, or sometimes even in final form, in January or even by the initial tax filing due date, certain K-1s might be an example).

Here is a quick list to get you started:

• Income Documents: W-2s, 1099s, K-1s, or any other proof of earnings.
• Investment Statements: Yearend summaries showing dividends, interest, and/or capital gains.
• Real Estate Records: Mortgage interest statements, property tax payments, or receipts for rental property expenses.
• Charitable Giving: Documentation for any 2024 charitable donations, including cash and non-cash contributions. This might include direct gifts of cash or appreciated securities, gifts to Donor Advised Funds (DAFs), Private Foundations, or Qualified Charitable Distributions (QCDs) from retirement accounts.
• Medical Expenses: Receipts for large medical expenses or premiums, especially if they exceed the deductible threshold.

Creating a dedicated folder (digital or physical) will keep everything in one place and save you valuable time as deadlines approach. Also, oftentimes, if you are working with a CPA, they’ll provide an annual tax organizer that helps you prepare using information from last year in a more detailed checklist form.

2. Take Advantage of Updated Contribution Limits

January isn’t just about new beginnings—it’s also a critical time to confirm you’ve maximized your retirement savings for 2024 and to plan for 2025.

Below are the updated 2025 contribution limits to keep in mind:

• 401(k) Contributions: You can contribute up to $23,500, plus an additional $7,500 for individuals age 50 or older. Some employers also offer and permit pre-tax contributions (employee or employer) to “non-qualified” retirement plans, representing further potential savings opportunities, but plan carefully. Unlike “qualified” retirement plans (i.e. 401(k)s) these assets (oftentimes referred as “restoration” plans or non-qualified, deferred compensation) may be at risk if something happens to the company.
• 401(k) Super Catch-Up Contributions: New for 2025, participants who turn age 60, 61, 62, and 63 by the end of the year can make a “super catch-up” of at least $11,250 for 2025. This applies to 403(b), 457(b), and Simple IRAs as well. This amount is over and above the regular catch-up contribution mentioned above. Speak with your wealth advisor for additional details.
• IRA Contributions: Limits are $7,000, plus an additional $1,000 catch-up for individuals 50 and up.
• HSA Contributions: Individual limits are $4,300, and family contributions can reach $8,550. Those aged 55 and older can contribute an extra $1,000.
• SEP IRAs for Business Owners: Business owners can make SEP IRA contributions for 2024 up to their extended tax filing deadline.

Maximizing these contributions not only supports your long-term retirement goals but can also help reduce your taxable income. If you still need to make 2024 contributions for an IRA or HSA, you have until April 15, 2025.

Additionally, if you are planning to contribute to a Roth IRA, check that your income doesn’t exceed the eligibility limits for direct contributions. For those above the limit, consult your tax professional to explore the “back-door” Roth IRA contribution strategy to maximize retirement savings. If you are actively participating in a 401(k) plan, you might also check with your employer and determine if a “Mega Roth” strategy is available.

3. Explore Tax Credits and Deductions You Might Overlook

Each year brings new opportunities to save, and it’s worth taking the time to review tax credits and deductions (and the timing of those deductions) that could reduce your tax bill. Some common areas to explore include:

• Education Credits: Are you or your dependents pursuing higher education? Look into the American Opportunity Tax Credit or the Lifetime Learning Credit.
• Energy Efficiency Incentives: If you upgraded your home with energy-efficient windows, doors, or appliances in 2024, you may qualify for a credit.
• Charitable Donations: Are you potentially in a higher income earning year? Perhaps you should consider “bunching” two years of charitable contributions in 2025 and taking the standard deduction in 2026. Visit with your wealth advisor or your tax professional to discuss the strategy in more detail. Make sure you have the necessary documentation for charitable gifts to ensure you can best utilize available tax planning strategies.

A thorough review of your situation with your tax advisor could reveal additional ways to save that you might not have considered.

4. Understand Recent Tax Law Changes

Tax laws evolve, and staying informed is critical to astute financial planning. Some key updates for the 2025 tax season include:

• Changes to income thresholds for deductions and credits.
• Adjustments to standard deduction amounts for single and joint filers.
• Updated phase-out limits for tax-advantaged accounts, like IRAs.

If you are unsure how these changes might affect your situation, it’s worth consulting with your advisor or tax professional to ensure you’re prepared.

5. Collaborate with Your Wealth Advisor and Tax Professional

Your financial and tax professionals can be your best allies especially during tax season. Together, they can help align your investment strategies, tax planning, and long-term goals. Whether it’s optimizing deductions, minimizing tax liability, or planning for the year ahead, their collaboration can save you time and money.

Looking Ahead to a Confident 2025

At Linscomb Wealth, tax season is  more than forms and filings—it is an opportunity to align your financial life with your future goals. Whether it is ensuring you’ve maximized your retirement savings, navigating recent tax law changes, or creating a legacy for your wealth, we’re here every step of the way.

If you have questions while you prepare for the 2025 tax season, visit with your Linscomb Wealth advisor.

Start the year strong with proactive planning and peace of mind.