November 21, 2025

2025 Year-End Tax Planning

As the year winds down it’s a good time to think about any year-end planning items that could reduce your tax liability. There is a lot of information contained within the Big Beautiful Bill, but there are only a few areas that you can take advantage of that aren’t automatically applied. Below is a summary of some of these automatic changes, followed by some suggestions to look at before year-end.

• Child Tax Credit – increases the nonrefundable credit from $2,000 to $2,200 per child subject to income phaseout.
   
• State and Local Tax (SALT) deduction cap is raised to $40,000 for tax years 2025 through 2029, subject to income phaseout.
   
• Charitable Giving – New limits and enhancements starting in 2026:

Taxpayers who take the standard deduction can claim a charitable deduction of up to $1,000 for single filers and $2,000 for joint filers.

For taxpayers who itemize, only the portion of charitable contributions that exceed 0.5% of their AGI will be deductible.

• Tips and Overtime pay deduction – above-the-line deductions are created for qualified tips up to $25K, and for overtime premium pay up to $12,500 for single filers and $25,000 for joint filers, subject to income and occupation limitations.
   
• Gambling Losses – Limits losses from wagering transactions to 90% of the amount of such losses, only to the extent of winnings (after 2025).
   
• Enhanced Standard deduction for Seniors – Additional $6,000 deduction is available for seniors (age 65+), subject to income limitations.
   
• Interest on Auto loans – deductible up to $10,000, subject to income limitations and eligible 2025-2028.
   
• Estate & Gift Exemption – Increased to $15 million (beginning 2026 indexed for inflation)

Before year-end, consider doing the following to reduce your tax liability.

• For tax filers who itemize, consider bunching itemized deductions via the following items:

Prepay your 2026 real estate taxes by December 31st to take advantage of the higher SALT cap.

Make larger charitable donations or do two years-in-one.

Make a large donation to a donor-advised fund to take advantage of the deductions this year and use that for charitable giving over many years and earn money on that investment.

• With a volatile stock market, take a look at investments with losses and consider selling those to offset gains or harvest losses to carryforward.
   
• Make sure to use all your remaining Flexible Spending Account (FSA) balances before year-end to avoid losing.
   
• Unfortunately, both the Energy-Efficient Home Improvement Credit and the Residential Clean Energy Credit expire at the end of this year. If you are considering home improvement projects, like new windows and doors, solar panels and wind energy property including battery storage for your home, make those upgrades before December 31, 2025.

Please contact our office if you have any questions.