Guidance for Individuals & Businesses as 2025 Comes to a Close
As 2025 winds down, taxpayers face a unique year-end environment shaped largely by the One Big Beautiful Bill Act (OBBBA) passed in July. The Act permanently extended nearly all major provisions originally set to expire under the Tax Cuts and Jobs Act (TCJA), while introducing new deductions, adjusting long-standing rules, and phasing out many energy-related incentives.
Below are the key year-end tax planning considerations we recommend reviewing before December 31, 2025.
1. Tax Law Update: What Changed for 2025?
TCJA Permanently Extended
OBBBA permanently extended:
- Lower individual tax rates
- Higher standard deduction
- Elimination of personal exemptions
- Many other TCJA-era rules that were set to sunset at the end of 2025
New Deductions Introduced
Available for 2025 (and most in 2026 as well):
- $6,000 Senior Deduction (age 65+, subject to income limits)
- $10,000 Auto Loan Interest Deduction for qualifying domestically manufactured new vehicles
- Deductions for Qualified Tip Income and Qualified Overtime Income
Employers will not be penalized for failing to meet new reporting rules for these items in 2025, but employees must keep good records.
Energy Credits Narrowed
- Clean vehicle credits ended for vehicles purchased after September 30, 2025.
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Two home-related energy credits remain through 2025:
- Energy Efficiency Home Improvement Credit (30% up to annual limits)
- Residential Clean Energy Credit (30% of qualified installations)
2. Year-End Planning for Individuals
Effective individual tax planning can significantly reduce your overall tax liability, particularly in a year of major legislative change.
Income Timing & Tax Brackets
With inflation-adjusted tax brackets rising in 2026, deferring income where possible may reduce your overall tax burden—especially for self-employed taxpayers, those expecting lower income next year, or individuals near higher capital gains or Net Investment Income Tax (NIIT) thresholds.
Capital Gains & Loss Planning
- Consider postponing gains if 2026 income will be lower.
- Harvest losses to offset gains, while observing wash-sale rules.
- NIIT applies once Modified Adjusted Gross Income exceeds $200,000 (single) / $250,000 (joint).
Itemized Deductions Are Back in Play
OBBBA raised the SALT deduction cap to $40,000 starting in 2025, making itemizing beneficial for more taxpayers.
- Bunch charitable contributions or medical expenses into one year
- Plan charitable gifts ahead of the new 0.5% AGI floor beginning in 2026
- Be mindful of itemized deduction phaseouts returning for high-income taxpayers in 2026
Retirement Planning (RMDs & QCDs)
Strategic retirement planning is especially important as distribution rules continue to evolve.
- Required Minimum Distributions (RMDs) begin at age 73.
- First-year RMDs may be delayed until April 1, 2026, but doing so results in two taxable distributions in 2026.
- Qualified Charitable Distributions (QCDs) of up to $108,000 (age 70½+) can satisfy RMDs and reduce taxable income.
Other Individual Strategies
- Prepay 2026 tuition in 2025 to maximize education credits
- Maximize 401(k) and IRA contributions
- Teachers may deduct up to $300 of eligible classroom expenses (expanding to itemized treatment in 2026)
3. Year-End Planning for Businesses
Proactive business tax planning can unlock significant savings before year-end.
Expanded Depreciation & Expensing
- 100% bonus depreciation for property placed in service after January 19, 2025
- Section 179 deduction increased to $2.5M, with a $4M phaseout threshold
Work Opportunity Tax Credit (WOTC)
- Expires after 2025
- All hiring and certification steps must be completed by year-end
Retirement Plan Opportunities (SECURE Act 2.0)
- Starter 401(k) and 403(b) plans available for employers without existing plans
- Certain discretionary plan amendments may be adopted up to the tax return due date
Additional Business Strategies
- Accelerate payment of bonuses, rent, and vendor invoices (cash method)
- Finalize contracts before year-end (accrual method)
- Review inventory for potential write-downs
- Plan to minimize exposure to the Corporate Alternative Minimum Tax
4. What Should You Do Now?
- Compare projected 2025 and 2026 income
- Evaluate capital gain and loss strategies
- Confirm eligibility for new deductions
- Finalize RMD and QCD decisions
- Businesses: plan asset purchases, hiring credits, and retirement plan updates
- Complete qualifying energy-efficient home improvements before credits expire
Need Help with Your Year-End Strategy?
The CDH CPA team helps individuals and businesses navigate complex tax changes and identify opportunities to reduce taxes. Contact us today to schedule your year-end planning consultation.
Disclaimer
This article is provided for general informational purposes only and does not constitute legal, tax, or professional advice. While every effort has been made to ensure accuracy, CDH CPA, PLLC makes no guarantees regarding completeness or applicability. Tax laws and regulations are subject to change. Consult a qualified professional before taking action based on this information.
