Year-End Tax Planning Tips - 2025
As 2025 winds down, now is the time to take advantage of year-end tax planning opportunities. With several changes taking effect under the One Big Beautiful Bill Act (OBBB) and updated IRS inflation adjustments, proactive planning can help reduce liabilities and improve refunds when you file in 2026.
1. Review Your 2025 Finances
Gather W-2s, 1099s, expense records, and charitable receipts. A clear financial picture ensures you won’t miss deductions or credits before the year closes.
2. Maximize Retirement Contributions
Saving for retirement remains a powerful way to lower taxable income:
401(k) plans (2025 limit): $23,500 in employee contributions. Workers age 50+ may add $7,500. Those age 60–63 may qualify for an additional “super catch-up” of up to $11,250 if the plan allows.
IRAs (Traditional & Roth): $7,000 limit for those under 50; $8,000 for age 50+.
Employer contributions plus employee deferrals cannot exceed $70,000 in 2025.
3. Standard Deduction vs. Itemizing
For tax year 2025 (returns filed in 2026), the standard deduction amounts are:
Single / Married Filing Separately: $15,750
Married Filing Jointly / Surviving Spouse: $31,500
Head of Household: $23,625
Under OBBB, the SALT deduction cap has been raised to $40,000 ($20,000 if married filing separately). This may make itemizing worthwhile for high-tax-state residents.
4. Expanded Benefits for Seniors
Beginning in 2025, taxpayers 65 and older may claim an additional $6,000 deduction (on top of the regular senior standard deduction). This provision is temporary, available through 2028, and phases out at higher incomes (over $75,000 single / $150,000 joint).
5. Updated Credits for 2025
Credits directly reduce tax owed, so don’t overlook them:
Child Tax Credit (CTC): Increased under OBBB to $2,200 per qualifying child. The refundable portion is up to $1,700 per child (subject to IRS guidance).
Earned Income Tax Credit (EITC): Still available for qualifying households.
Energy-Efficient Home Credits: Enhanced credits for solar, battery storage, and home upgrades remain in effect.
6. Health Savings Accounts (HSAs)
If you have a high-deductible health plan (HDHP), consider contributing to an HSA:
Self-only coverage: $4,300
Family coverage: $8,550
Catch-up (age 55+): $1,000
HSAs are triple tax-advantaged—deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses.
7. New Deduction Opportunities under OBBB
OBBB also introduced additional temporary deductions beginning in 2025, including:
Certain tip income
Overtime pay
Auto loan interest (for U.S.-assembled vehicles, subject to limits)
The IRS will continue to issue guidance on eligibility and record-keeping requirements.
8. Charitable Giving Strategies
Donating appreciated stock rather than cash can maximize deductions and avoid capital gains. Ensure you keep receipts for all 2025 donations made by December 31.
9. Consult a Professional
With the 2025 updates and OBBB provisions, careful planning is more valuable than ever. A CPA can help confirm eligibility, calculate phase-outs, and ensure you benefit from all available deductions and credits.
Tax year 2025 brings both inflation adjustments and new opportunities from OBBB. By planning ahead—maximizing contributions, using credits, leveraging deductions, and making informed year-end moves—you can reduce your tax burden and be well prepared when filing your 2025 return in 2026.
Some provisions are new and subject to IRS guidance. Always verify final eligibility with official IRS publications or your tax advisor before filing.
