5 simple ways to lower your taxable income before the end of 2025

The tax brackets you fall into determine how much you turn over to the IRS each year. Which brackets you fall into depends mostly on your taxable income.

There are several ways you can lower your taxable income, from deducting student loan interest to putting more into retirement.

Some steps can wait till you file your return, but others need to be made before the end of the year.

One of the easiest and most beneficial ways to reduce your taxable income is to contribute to a pre-tax retirement account, like a 401(k) or traditional IRA. With pre-tax contributions, you're taking less out of your disposable income now, so your money grows tax-deferred. (You will have to pay taxes on the funds you withdraw in retirement, however.)

In 2025, the 401(k) contribution limit is $23,500, with an additional $7,500 catch-up contribution available for workers 50 and older and a super-sized catch-up limit of $11,250 for workers 60 to 63. For your contribution to affect your taxable income for 2025, you must make any contributions by Dec. 31, 2025.

For traditional and Roth IRAs, the 2025 contribution limit is $7,000 across all accounts, with an additional $1,000 available to people 50 and older. Unlike 401(k)s, the deadline to contribute to IRAs for tax year 2025 is April 15, 2026.

CNBC Select recommends Charles Schwab's IRA for its zero-minimum deposit requirement for active investing and 24-hour customer support.

Fidelity Investments doesn't charge commission fees for stock, ETF and options trades and there are no transaction fees on over 3,400 mutual funds.

Your contributions to a traditional IRA may also be tax-deductible, depending on your income, filing status and whether or not you have an employee-sponsored retirement plan.

"Many people are eligible to deduct their traditional IRA contributions, which can help reduce their tax liability," Corbin Blackwell, a certified financial planner (CFP) at Betterment, told CNBC. "Not all IRA contributions are tax-deductible, however. So be sure to work with your tax preparer to understand your situation."

You can't take the deduction if you have a retirement plan at work and your income is at least $87,000 as a single filer/head of household, $143,000 as a married couple filing jointly or $10,000 as part of a married couple filing separately.

If you don't have a retirement plan at work, you can take the full deduction up to your contribution limit.

If you work for a publicly traded company, you may be eligible to enroll in an employee stock purchase plan (ESPP), which allows you to use after-tax dollars from your paycheck toward purchasing shares of your company, typically at a discount on the price (usually around 15%).

You can choose how much you contribute to your ESPP, usually between 1% to 10% of your annual salary, but the limit is $25,000 per year.

The tax advantage comes into play when you decide to sell your shares: While employees can choose to sell immediately after purchase or at a later date, they're rewarded for holding onto their shares for at least one year from the purchase date.

Selling immediately means you pay ordinary income tax, while selling later means you pay a lower long-term capital gains tax, which reduces your tax burden.

If you're considering this strategy, make sure you have enough cash to contribute and that the investment fits your overall financial plan. Goals like paying off high-interest debt, saving up an emergency fund or contributing to a 401(k) or IRA (and meeting any employer match) should be the priority.

A health savings account (HSA) allows individuals with a high-deductible health plan to save for upcoming medical expenses.

HSAs offer a triple tax advantage, since funds go in tax-free (or tax-deductible if you opened your own account), can grow tax-free by investing the balance, and can be withdrawn tax-free if used for qualifying medical expenses like deductibles, copays or coinsurance. Plus, any remaining balance on your HSA will roll over from year to year.

The limits of pre-tax funds that can be contributed to an HSA for 2025 are $4,300 for an individual and $8,550 for a family, plus an additional $1,000 if you're 55 or older.

If your company sponsors an HSA, see if it contributes a set amount or matches employee contributions. Keep in mind that any employer contributions count toward the IRS' maximum annual limits.

Some employers also offer flexible spending accounts (FSA), which are similar to HSAs in that they reduce your taxable income by allowing pre-tax contributions. But you can't invest the money you contribute to an FSA. In addition, funds typically don't roll over to the next year and if you change jobs, you'll lose that account.

In 2025, the FSA contribution limit is $3,300.

If you have student loans, they've been accruing interest throughout the year.

For 2025, you can deduct up to $2,500 of that interest without itemizing your deductions. The deduction starts phasing out for single filers if your Modified Adjusted Gross Income (MAGI) exceeds $75,000 and is completely unavailable at $90,000. 

For married couples filing jointly, the phase-out begins at $155,000 and is complete at $185,000 MAGI.

It's normal to have stocks in your portfolio that aren't performing well. The good news is you can use a market downturn to your advantage. Known as tax-loss harvesting, this technique involves using your losses to offset the taxes you would pay on other investment gains, thereby lowering your taxable income.

"Investors can sell losing stocks and realize capital losses, which can be used to offset capital gains," Amanda Gutierrez, a CFP and financial planning consultant at eMoney Advisor, told CNBC Select. "For those who have no capital gains, those losses can offset up to $3,000 of ordinary income. Any excess losses can carry over to future years and be used to lower taxes."

While you can certainly implement tax-loss harvesting on your own, it's easy to do through robo-advisor services from companies like Wealthfront or SoFi Invest®*. They automatically scan for opportunities to harvest losses, reducing investors' tax exposure throughout the year.

We still suggest talking to your financial advisor about the tax-harvest strategy they recommend for you.

At CNBC Select, we work with experts who have specialized knowledge and authority, grounded in years of relevant training and experience. For this story, we interviewed Amanda Gutierrez, a practice management consultant at Mariner, a San Diego-based wealth management firm. Previously, Amanda was a CFP at eMoney Advisor.

We also spoke with Corbin Blackwell, a CFP at Betterment. Previously, Corbin worked as a vice president of business development at Farr, Miller & Washington and was a client services associate at Morgan Stanley Wealth Management. She received a Bachelor's in economics from Denison University.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice to help them make informed financial decisions. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of tax products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.