2025 Year-End Tax Planning for Business Owners

Year-end planning looks different for 2025. The One Big Beautiful Bill Act (OBBBA), which passed earlier this year, expanded several deductions and introduced new tax breaks for workers, families, and seniors. It also extended rules that were expected to change. With so many updates in place, a review of personal finances before December 31 can help uncover new tax-saving opportunities for 2025. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.

Income, Withholding, and Standard Deduction Analysis 

Taxpayers should begin by reviewing 2025 income, withholding, and estimated payments. The top tax rate remains 37%, and inflation adjustments continue to limit bracket creep, so a year-end check helps confirm whether payments align with expected liability.

The next step is comparing the standard deduction with itemized deductions. For 2025, the standard deduction is $31,500 for married couples, $15,750 for single filers, and $23,625 for heads of household. About 90% of taxpayers usually take the standard deduction, but that could change this year because of updates under OBBBA.

One important change is the higher SALT deduction. OBBBA raised the cap on state and local tax deductions to $40,000 for married couples from 2025 through 2029. Because SALT often determines whether itemizing provides a larger benefit, the higher cap may lead more households, especially in high-tax states, to itemize again. Income thresholds apply. 

Retirement Contributions 

Retirement contributions continue to be a reliable way to reduce taxable income. For 2025, the limits are $23,500 for 401(k) and 403(b) plans, plus there’s a $7,500 catch-up contribution for individuals age 50 or older. IRA contributions are limited to $7,000, with a $1,000 catch-up. SIMPLE IRA plans allow up to $16,500, and a $3,500 contribution is available for eligible participants.

Taxpayers should review contribution levels before December 31, especially if they changed jobs or plan providers during the year. A Roth conversion may also be considered in a lower-income year. This strategy moves money from a traditional IRA to a Roth IRA and triggers tax on the converted amount. Later, those funds can be withdrawn from the Roth tax-free. 

Health Accounts and Medical Expenses 

Health savings accounts (HSAs) remain a strong planning tool for individuals enrolled in high-deductible health plans. For 2025, contribution limits are $4,300 for individuals and $8,550 for families, with a $1,000 catch-up contribution available for those age 55 and older.

Those with flexible spending accounts (FSAs) should review balances and plan for any “use-it-or-lose-it” rules or limited carryovers. Individuals with higher medical expenses may want to see whether grouping expenses into 2025 will help exceed the 7.5% of AGI threshold for itemized medical deductions.

Investment and Capital Gains Planning

Individuals with investments should review gains and losses before December 31. Selling an investment at a gain increases taxable income, while selling at a loss generates a deduction. These can be used to offset each other. This process, often called tax-loss harvesting, can lower the tax owed on investment activity for the year.

If total losses exceed total gains, up to $3,000 of the remaining loss can reduce ordinary income for 2025. Any unused losses carry forward to future years. Reviewing these items now can help determine whether realizing a loss or delaying a sale provides a better tax result.

Estate and Gift Tax 

OBBBA extended the higher federal estate and gift exemption. For 2025, the exemption is $13.99 million per person, rising to $15 million in 2026 before being adjusted annually for inflation. Individuals can give up to $19,000 per recipient in both 2025 and 2026 without using the lifetime exemption. As a general rule, listed beneficiaries, trusts, and gifting plans should be reviewed annually.

529 Plans

Families saving for education should review 529 contributions before December 31. Many states offer tax deductions or credits for contributions made by year-end, and requirements vary by state.

New rules beginning in 2025 expand the qualified uses of 529 accounts and give families more flexibility in how these funds may be spent. Taxpayers should also note that unused 529 balances can be rolled into a Roth IRA for the beneficiary, up to a lifetime limit of $35,000, if the account has been open for at least 15 years under rules that began in 2024.

Charitable Contributions 

For 2025, individuals must itemize to deduct traditional charitable contributions; standard-deduction filers do not receive a tax benefit for giving this year. Beginning in 2026, a new deduction becomes available for non-itemizers: $1,000 for single filers and $2,000 for married couples.

Itemizers will also face new limits next year. Starting in 2026, charitable deductions will only apply to amounts above 0.5% of AGI, and high-income taxpayers will calculate the value of the deduction at the 35% rate even if the marginal rate is higher. These changes mean individuals should review whether accelerating giving in 2025 or waiting until 2026 provides the better tax result.

New Credits and Deductions

OBBBA introduced several new or expanded tax benefits beginning in 2025:

• Child Tax Credit — Increased to $2,200 per qualifying child, with phaseouts at $200,000 (single) and $400,000 (married filing jointly).
• “No Tax on Tips” Deduction — Allows up to $25,000 of qualified tip income to be deducted; phase-out begins at $150,000 (single) and $300,000 (MFJ).
• “No Tax on Overtime” Deduction — Deduct up to $12,500 (single) or $25,000 (MFJ) of qualifying overtime pay; same income phase-outs as the tip deduction.
• Senior Tax Deduction — An additional $6,000 deduction for taxpayers age 65+; a married couple where both qualify may deduct $12,000. Phase-out begins at $75,000 (single) and $150,000 (MFJ).
• No Tax on Car Loan Interest Deduction — Deduct up to $10,000 of interest paid on a qualifying new vehicle loan; phase-out begins at $100,000 (single) and $200,000 (MFJ).

Contact Us

Year-end planning can help reduce taxable income for 2025 and help prepare business owners for new rules in 2026. Reviewing important tax information before December 31 ensures that individuals make the most of the provisions available. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis, can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.