2025 Year-End Tax Planning Checklist for Tech Professionals

The end of the year is one of the most important windows for tech professionals to review their tax situation and make smart financial moves. Whether your goal is to reduce taxes, improve cash flow, or simply get organized, these steps will help you end the year confidently and start 2026 on solid financial footing.

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Withholding & Income Management

‍Action: 

Review year-to-date tax withholdings and estimated tax payments.

‍Why Tech Pros Should Care:

Your company withholds 22% tax on your RSUs (unless income exceeds $1M). With high salary, bonus, and RSUs or other equity compensation, you may be in a much higher tax bracket, so you are at risk of under-withholding or potentially needing to make an estimated quarterly tax payment. You do not want the negative tax surprise next April.

‍2025 Considerations: 

• Check your YTD paystub and look at the Federal Income Tax line. Model your remaining compensation (salary, bonus, RSUs, etc.) until year end. Estimate the Federal Income Tax to be withheld. Tally it up.
• Make a similar calculation for State Income Tax if applicable.
• Check your W-4 withholding.
• Consider if you need to increase withholding or make an estimated tax payment.
• Consult a qualified tax professional for an official tax projection.

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Retirement Savings Optimization

‍Action:

Max out your 401(k).

‍Why Tech Pros Should Care:

High income means you want to seek ways to reduce taxes.

Your 401(k) contribution reduces your Adjusted Gross Income (AGI).

Don’t leave the company match on the table.

‍2025 Considerations:

• Ensure you reach $23,500 max contribution by year end.
• If you are age 50+, the additional catch-up contribution is $7,500. Note: In 2026, this will count as an after-tax Roth 401(k) contribution.
• Review your investment options and ensure your selections are aligned with your goals and risk profile.

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Health-Related Tax Strategies

‍Action:

Max out your Health Savings Account (HSA). Contributions for 2025 can be made up until the tax filing deadline in April 2026.

Use the remaining Flexible Spending Account (FSA) before year end.

‍Why Tech Pros Should Care:

If you are participating in a high-deductible health plan (HDHP), the HSA is available. 2025 HSA Contribution Limits (EE + ER contributions combined):

$4,300 Self coverage

$8,550 Family coverage

$1,000 Age 55+ catch up

HSAs offer a triple tax benefit: Deductible contribution, Tax-deferred growth, Potentially tax-free withdrawals for medical expenses. The HSA is a great tax reducing tool, and can be used as a fantastic savings strategy if not using it for current medical expenses. Keep and file your receipts for qualified medical expenses.

The FSA typically has a “use it or lose it” rule. Check your employer’s plan to see if there is a grace period or a carry forward policy.

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Advanced Roth Strategies

‍Action:

Fund a Mega Backdoor Roth. Check to see if your plan allows for after-tax contributions and the in-plan Roth conversion feature.

Consider making a Backdoor Roth contribution (different from the Mega Backdoor Roth).

‍Why Tech Pros Should Care:

Tech pros often have high income that results in excess cash flow. Instead of funneling all the cash to a taxable account, you may have the ability to get more cash into Roth for the tax advantages. 

(2025: $70,000 limit - $23,500 – company match = After-tax contribution)

‍2025 Considerations:

How: Make an after tax 401k contribution. Leave as cash. Make in-plan conversion to Roth 401k. Invest cash into available investment selections.

Regarding the standard Backdoor Roth, if you have 2025 Modified Adjusted Gross Income (MAGI) above $165,000 (Single) or $246,000 (MFJ), then you cannot make a direct Roth IRA contribution. But you may be eligible for the Backdoor Roth. You must be mindful of the pro rata rules. And your pre-tax IRA balance must be zero by December 31. See image below.

‍Roth Conversion (Bracket Fill-Up)

‍Action: 

Review and estimate your current year marginal tax bracket. Determine whether it makes sense to convert some pre-tax IRAs into a Roth IRA. The deadline for a Roth conversion is December 31.

‍Why Tech Pros Should Care:

If you happen to find yourself in a lower tax bracket this year (perhaps due to variable income, a job loss, or other changes), filling up a lower tax bracket may be smart, especially if you expect higher future tax rates. Roth conversions are a taxable event, so be certain to figure out how you will pay the tax. Will the funds come from the converted dollars or from side reserves?

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Charitable & Family Gifting

‍Action:

Donate appreciated stock (like RSUs) instead of cash to maximize the tax efficiency.

If you do not normally itemize deductions, applying a bunching strategy can help get you above the threshold to itemize.

Make annual gifts to individuals.

‍Why Tech Pros Should Care:

Tech pros often have concentrated stock positions with unrealized gains. Donating shares of stock allows you to get a tax deduction (if you itemize), avoid capital gains tax, and the ability to accomplish giving intentions.

‍2025 Considerations:

• Consider donating appreciated stock vs. cash.
• Look at bunching a few years worth of charitable giving into 2025 to exceed the standard deduction.
• You and your spouse may each give up to $19,000 to any individual without filing a gift tax return.

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Equity Compensation Decisions (ISOs)

‍Action:

Review Incentive Stock Options (ISOs) grants to optimize the tax outcome.

‍Why Tech Pros Should Care:

Many people in tech receive ISOs. The decision on exercising and timing can affect the tax treatment. The AMT exemption (kind of like a standard deduction for AMT purposes) will be reduced in 2026, which may cause some to exercise ISOs in 2025..

‍2025 Considerations:

• Get organized and map out your vesting and exercise windows.
• Remember that to qualify for long-term capital gains, you must hold the shares at least 2 years from the grant date and 1 year from exercise.
• Alternative Minimum Tax (AMT) needs to be taken into account prior to exercising. Otherwise, you may face an unexpected surprise at the tax filing.

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Investment Tax Management

‍Action:

Harvest capital losses or gains, and consider carryforward loss balances.

Review holdings within account types to optimize the tax efficiency of asset placement.

‍Why Tech Pros Should Care:

High earning tech employees get phased out of many tax thresholds. Being proactive about tax harvesting and asset location can help reduce your taxes and create more efficient wealth.

‍2025 Considerations:

• Review your taxable accounts to identify positions with net gains and losses. Use stored up carryforward losses against current year gains. Up to $3,000 of losses can offset 2025 ordinary income.
• Place tax-inefficient assets in IRAs, and tax-efficient assets in taxable accounts. Roths are ideal for higher risk/return assets.

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Deferred Compensation Plan

‍Action:

If your employer offers a deferred compensation plan and you are eligible, evaluate signing up for 2026. But you must sign up within 2025, and likely very soon!

‍Why Tech Pros Should Care:

Many people in tech are high earners. Taxes can be steep. This tool provides you with the ability to defer some of your income to a future year, particularly if you expect to be in a lower tax bracket. For example, if you are age 50 but expect to retire at age 55, you could defer income until after your retirement date. This reduces current year tax and may reduce overall tax if you receive that income while in a lower tax bracket.

‍2025 Considerations:

Check your employer’s plan availability and your eligibility.

Tip: Non-qualified deferred compensation plans carry their own risk and are less protected than qualified plans. Be sure to assess your risk tolerance and if the strategy is a prudent decision for taxes and investments.

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Estate & Protection Planning

‍Action:

Review and confirm beneficiary designations on all bank and investment accounts and insurance policies.

‍Why Tech Pros Should Care:

Because it’s a no brainer! Missing or wrong beneficiary designations can sink your planning efforts. You love your family, right!

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Year-end planning doesn’t have to be overwhelming, but it does require intentionality. If you want help prioritizing these steps, evaluating the tax impact, or integrating them into broader financial planning, I would be glad to walk through it with you.

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Schedule your Free Assessment.

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References:

‍IRS.gov

‍Tax Foundation

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‍The foregoing content reflects the opinions of TwoTenPlanning and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as financial, legal, tax, or investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee or assurance that diversification, strategies based on Nobel prize-winning research, or any investment plan or strategy will be successful. Discuss your specific tax issues with a qualified tax professional. Converting from a Traditional IRA to a Roth IRA is a taxable event.