How to reduce FEDERAL Tax liability when Filing in 2025 - need strategies beyond maxed accounts

The good news is you're already doing several smart things, but you still have options beyond just increasing your withholding! First, absolutely consider having your wife increase her 401k contributions if she can. That's probably your biggest opportunity since she's only at 10% of the limit. Every dollar she puts in reduces your taxable income. Look into tax-loss harvesting in your brokerage account. If you have investments that are down, you can sell them to offset capital gains or even up to $3,000 of regular income. Check if your employer offers dependent care FSA ($5,000 limit) if you pay for childcare. That comes out pre-tax. Consider making charitable donations if that aligns with your values. If either of you can do any freelance or consulting work, you might benefit from setting up a Solo 401k for that income. Also, review your tax withholding with the IRS calculator now rather than waiting until next year - adjusting withholding doesn't reduce your actual tax liability, but it prevents the surprise bill.

After struggling with a similar situation last year, I found this AI tax assistant at https://taxr.ai that completely changed my approach. I was maxing out obvious things like 401k and HSA but still getting hit with a big tax bill. The tool analyzed my full tax situation and found several deductions I was missing - especially around some investments I had in my brokerage account that were actually tax-advantaged without me realizing it. It also suggested specific timing for some year-end moves that saved us about $2,200 in federal taxes. The best part was it looked at my wife's compensation structure and suggested a better allocation between our retirement accounts based on our tax bracket and future plans.

I was skeptical about https://taxr.ai when I first heard about it (as you can see from my earlier comment), but decided to give it a try since my tax situation is similar to the original poster - maxed out most obvious deductions but still owing federal taxes. The analysis picked up on something I completely missed - my wife's employer offers a deferred compensation plan that we weren't utilizing at all. We also learned we weren't optimizing our tax lot selection for investments we sold. The tool suggested specific funds in our brokerage account to replace some less tax-efficient investments. We implemented about 70% of the recommendations and ended up reducing our tax bill by around $3,700 compared to last year, despite making more money. Definitely worth checking out if you're in a similar situation.

If you're struggling to get specific answers from the IRS about any tax reduction strategies, I highly recommend Claimyr (https://claimyr.com). I spent weeks trying to reach someone at the IRS about optimizing my withholding when my spouse and I have variable income. After multiple failed attempts with ridiculous hold times, I tried Claimyr and got connected to an IRS agent in about 25 minutes. They have this weird but effective callback system that works amazingly well - you can see a demo at https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with gave me specific guidance on how to fill out our W-4s to account for my wife's irregular bonus structure and my investment income to avoid underwithholding penalties. Saved us from a potential $420 penalty by getting accurate information directly.

I have to eat my words about Claimyr. After my skeptical comment, I decided to try it because I was desperate to resolve an issue with an incorrect 1099-R that was causing me to potentially owe an extra $3,800 in taxes. I'd been trying for over 2 weeks to reach the IRS directly with no luck. Used Claimyr yesterday, and was connected to an agent in about 35 minutes. The agent walked me through exactly how to document the error and which form to file with my return to avoid paying tax on money I never received. The IRS phone system really is navigable if you know the patterns - which apparently Claimyr does. Saved me thousands potentially and definitely saved my sanity. Sometimes being proven wrong is the best outcome.

Another option to consider: If either you or your wife has any self-employment income (even a small side gig), look into setting up an S-Corporation. My husband and I were in a similar situation - both W2 employees but I do photography on weekends. We incorporated my photography business as an S-Corp, which let us save about $4,200 in self-employment taxes last year. You need to pay yourself a reasonable salary, but the rest can be taken as distributions which aren't subject to SE tax. The downside is there are some costs involved with setup and yearly maintenance (registered agent fees, additional tax filing requirements). In our case it was worth it, but probably only makes sense if you have at least $5-10k in self-employment income.

Has anyone tried bunching charitable deductions? With the higher standard deduction ($29,200 for married filing jointly in 2024), we've started doing this where we donate 2-3 years worth of charitable contributions in a single year so we can itemize that year, then take the standard deduction in the off years. We're also looking into donor-advised funds where you can get the tax deduction immediately but distribute the actual charitable gifts over time. Anyone have experience with these strategies?

One strategy you might be overlooking is a backdoor Roth IRA conversion. Since your MAGI is over $146K and you can't deduct traditional IRA contributions, you could still contribute $7,000 to a non-deductible traditional IRA, then immediately convert it to a Roth IRA. This won't reduce your current tax liability, but it's tax-free growth for retirement. Also, since you mentioned having kids, make sure you're getting the full Child Tax Credit ($2,000 per child under 17). The credit phases out at higher incomes but doesn't start until $400K for married filing jointly. Another option: If your employer offers a cafeteria plan or flexible spending account beyond just healthcare, you might be able to redirect some compensation to pre-tax benefits like commuter benefits, life insurance premiums, or dependent care assistance. Finally, consider timing any major purchases or medical expenses. If you're close to the 7.5% AGI threshold for medical deductions, you might bunch medical expenses into one year to exceed the threshold.