Dear Clients and Friends:
The end of the year is often the best time to review your tax situation and consider strategies that may reduce your overall tax liability. Traditionally, the conventional wisdom has been to accelerate deductions into the current year and defer income to the next. However, new tax legislation enacted in 2025—the One Big Beautiful Bill Act (OBBBA)—makes planning more nuanced.
The OBBBA, signed on July 4, 2025, follows and extends many provisions originally enacted by the Tax Cuts and Jobs Act (TCJA), many of which were scheduled to expire after 2025. The new law generally extends those rules, often makes them permanent, and introduces several new opportunities and pitfalls for both individuals and businesses. In some cases, changes are effective for 2025; others begin in 2026 or later.
In addition, recent laws such as SECURE 2.0, plus new IRS rulings and regulations, also affect year-end tax planning. Navigating this landscape is difficult without professional guidance.
With that in mind, we have prepared this 2025 Year-End Tax Letter, organized into three broad areas:
- Individual Tax Planning
- Business Tax Planning
- Financial Tax Planning
These ideas are general in nature; your specific circumstances should always be reviewed with a tax professional.
INDIVIDUAL TAX PLANNING
Itemized Deductions & SALT
The TCJA’s higher standard deduction and suspension of certain itemized deductions have generally been extended by the OBBBA, with some modifications.
Year-end ideas:
- If you expect to itemize in 2025, consider accelerating:
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- Charitable contributions to qualified organizations
- Mortgage interest payments where appropriate
- State and local tax (SALT) payments, subject to the expanded 2025 SALT cap under OBBBA
If you are close to the standard deduction, “bunching” deductions into one year may help you exceed it.
Charitable Giving
Charitable deductions remain available within AGI-based limits, but OBBBA adds new rules beginning in 2026, including an AGI “floor” before deductions are allowed and a modest deduction for some non-itemizers.
Year-end idea:
If you plan to itemize in 2025, consider accelerating gifts into this year. Donating appreciated long-term securities can be especially tax-efficient.
Home Energy Credits (Through 2025)
Two valuable credits for energy-efficient improvements and clean energy property for your home are still available for 2025 but are scheduled to expire afterward.
Year-end idea:
If you are considering qualifying energy improvements (e.g., insulation, high-efficiency HVAC, solar), completing them in 2025 could secure valuable credits before they sunset.
Alternative Minimum Tax (AMT)
AMT remains a parallel tax system that can affect higher-income taxpayers, though exemption amounts have increased significantly in recent years and are further adjusted by OBBBA going forward.
Year-end idea:
If you are near the AMT threshold, timing items such as incentive stock option exercises or large deductions may help minimize exposure.
Family-Related Tax Breaks
Several family-oriented provisions continue to provide savings:
- The Child Tax Credit (CTC) remains available, with enhanced amounts and phase-outs.
- The dependent care credit, adoption credit, and education incentives (including Section 529 plans) can all factor into planning.
- Flexible spending accounts (FSAs) for dependent care and health expenses may have higher limits in future years.
Year-end ideas:
- Review your eligibility for family credits and consider timing tuition payments or childcare expenses where possible.
- Be sure to use FSA funds before year-end, subject to any limited carryover or grace period allowed by your employer’s plan.
BUSINESS TAX PLANNING
Depreciation & Expensing
OBBBA enhances two key depreciation-related provisions for qualifying business property placed in service:
- Section 179 expensing, with increased dollar limits and phase-out thresholds
- First-year bonus depreciation, restored to 100% for qualifying property starting in 2025
Year-end idea:
If you plan to acquire machinery, equipment, or certain other business assets, placing them in service before year-end can accelerate deductions onto your 2025 return.
Qualified Small Business Stock (QSBS)
QSBS rules remain attractive for owners of certain C corporations, and OBBBA further improves the potential gain exclusion by adjusting holding-period percentages, gain caps, and asset thresholds.
Planning note:
Structuring new ventures to qualify for QSBS treatment can significantly reduce tax on a future sale, subject to complex requirements.
Work Opportunity Tax Credit (WOTC)
The WOTC continues to provide credits for hiring workers from targeted groups, but it is scheduled to sunset after 2025, absent further legislation.
Year-end idea:
If you are expanding payroll, consider whether any new hires might qualify your business for the WOTC and complete required certifications in a timely manner.
Employee Compensation & New Deductions
OBBBA introduces new deductions related to:
- Certain overtime pay
- Tips in service industries
- Interest on qualifying car loans for a limited period
These provisions are subject to dollar caps and income phase-outs.
Year-end idea:
Review your compensation structures and employee policies to see whether adjustments could allow staff to benefit from these temporary deductions without harming your overall business position.
Research & Experimental (R&E) Expenses
The TCJA required many domestic R&E costs to be amortized over 5 years; OBBBA partially restores faster deductions for qualifying domestic R&E, with special rules for foreign activities.
Year-end idea:
If you incur R&E costs, timing and documentation are critical. In some cases, amended returns for prior years may be worth exploring.
Other Business Considerations
Additional year-end planning ideas include:
- Stocking up on routine supplies you would purchase soon anyway
- Reviewing SALT “workaround” elections for pass-through entities
- Maximizing the Qualified Business Income (QBI) deduction for pass-throughs and self-employed individuals
- Reviewing start-up cost treatment for new businesses
- Timing bonuses for accrual-basis businesses (with special rules for certain owners)
FINANCIAL TAX PLANNING
Capital Gains & Losses
Long-term capital gains and qualified dividends continue to enjoy preferential tax rates, while short-term gains are taxed at ordinary income rates.
Year-end ideas:
- Consider “harvesting” capital losses to offset gains, especially short-term gains.
- Watch out for the wash sale rule when repurchasing securities sold at a loss.
Net Investment Income Tax (NIIT)
The 3.8% NIIT applies to certain investment income for higher-income taxpayers.
Planning thoughts:
- Shifting some holdings to municipal bonds or turning passive activities into active ones may reduce NIIT exposure.
- When combined with regular tax and state income taxes, your effective rate on investment income can be quite high; this should inform your overall strategy.
Retirement Plans, RMDs & QCDs
Under SECURE 2.0, the age for required minimum distributions (RMDs) has increased, and penalties for missed RMDs have been reduced, though they remain significant.
Year-end ideas:
- Confirm whether you (or a beneficiary) must take an RMD for 2025 and arrange distributions before year-end when required.
- Take full advantage of 401(k) and similar plans, including catch-up contributions where available.
- Consider whether a Roth IRA conversion makes sense in a relatively low-income year.
- If you are age 70½ or older, a qualified charitable distribution (QCD) from an IRA may allow you to support charity with favorable tax treatment.
Estate & Gift Planning
The federal estate and gift tax exemption is at historically high levels and is further adjusted by OBBBA in 2026 and beyond. The annual gift tax exclusion also continues to increase with inflation.
Year-end ideas:
- Review your estate plan to confirm it still aligns with today’s exemption amounts and your goals.
- Consider using annual exclusion gifts near year-end and early in the new year as part of a long-term wealth-transfer strategy.
Kiddie tax rules, rental property limitations, and other long-standing provisions may also impact your broader financial plan, especially where children or vacation homes are involved.
CONCLUSION
This year-end tax-planning letter reflects the federal tax laws, rules, and regulations in effect for 2025, including the OBBBA, SECURE 2.0, and related IRS guidance. Future legislation or new IRS interpretations could change these rules.
Please remember that this letter is intended only as a general guideline. Your personal and business circumstances are unique and deserve careful analysis. We would be pleased to meet with you to review your situation and help you implement the strategies that are most appropriate for you.
This year-end tax-planning letter is published for our clients, friends and professional associates. It is designed to provide accurate and authoritative information with respect to the subject matter covered. The information contained in this letter is not intended or written to be used for the purpose of avoiding any penalties that may be imposed under federal tax law and cannot be used by you or any other taxpayer for the purpose of avoiding such penalties. Before any action is taken based on this information, it is essential that competent, individual, professional advice be obtained.