Year-End Retirement Moves That Cut Your Tax Bill
SEP, Solo 401(k), Traditional IRA — how to choose, and how much you can actually deduct in 2025.
One of the most reliable ways to lower a Cincinnati tax bill isn't a clever loophole — it's a retirement contribution. The IRS gives you until the filing deadline (and sometimes the extended deadline) to fund an account for the prior year. Here are the accounts we most often use with clients and the 2025 limits that make them worth doing before December 31.
Traditional IRA — the everyone starter
$7,000 in 2025 ($8,000 if you're 50+). Fully deductible if you're not covered by a workplace plan; phased out at higher incomes if you are. You have until April 15, 2026 to contribute for tax year 2025.
SEP-IRA — the self-employed workhorse
Up to 25% of net self-employment income, capped at $70,000 for 2025. Best for sole proprietors and single-member LLCs with no employees (or willingness to fund employees at the same percentage). Contribution deadline is the extended filing deadline — October 15, 2026 for a 2025 contribution.
Solo 401(k) — the higher-limit alternative
For owner-only businesses, a Solo 401(k) often beats a SEP because you can combine the $23,500 employee deferral with the ~25% employer contribution — reaching the same $70,000 cap on much less income. Catch: the account has to be established by December 31, 2025 to make a 2025 employee deferral, even though the contribution itself can be funded later.
HSA — the triple-tax-free bonus
Not technically retirement, but the closest thing there is to a perfect account. If you're on a qualifying high-deductible health plan, $4,300 individual / $8,550 family in 2025, fully deductible, grows tax-free and comes out tax-free for medical expenses. After 65 it works like a Traditional IRA for anything else.
What to do before December 31
- Estimate your 2025 net income now — don't wait for tax season.
- Decide which account structure fits (Solo 401(k) has the December 31 setup deadline, so decide first).
- Open the account with your custodian of choice.
- Fund what you can now, plan the rest by the filing deadline.
If you'd like us to run the projection for you, schedule a free year-end planning call and we'll build the plan around your real numbers.
