Key Takeaways
- The 2025 Tax Act (OBBBA) introduces permanent tax bracket reductions, expanded Child Tax Credits, and immediate R&D expensing—business owners and families who plan now may reduce 2025 tax liability
- Critical deadlines: December 31, 2025 for Section 179 deductions, charitable giving strategies before the 2026 AGI floor kicks in, and bonus depreciation on qualifying assets
- Strategic insight: 2025 is a transition year—temporary provisions like overtime deductions and SALT cap increases expire after 2029, requiring multi-year tax planning (because Congress never met a sunset provision they didn’t love)
- Bottom Line: Working with a tax advisor who understands both 2025 changes and 2026 implications lets business owners capture immediate savings while positioning for long-term tax efficiency
December 31 isn’t just another deadline this year—it’s the dividing line between tax opportunities you’ll actually regret missing. The One Big Beautiful Bill Act (OBBBA) signed into law in July 2025 creates one of those rare legislative moments where temporary provisions, permanent extensions, and transition-year quirks all collide.
Think of it as Congress giving us a choose-your-own-adventure book, except some chapters expire in 2028 and others stick around indefinitely. Here are the tax tips every business owner and individual needs before midnight on New Year’s Eve.
Major Tax Law Changes for 2025-2026
The OBBBA permanently extends tax brackets from the 2017 Tax Cuts and Jobs Act. The rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—remain in effect indefinitely, removing the uncertainty that faced taxpayers approaching the original 2026 sunset date. For married couples, the brackets maintain double the thresholds for single filers, eliminating the marriage penalty that previously affected joint returns.
Standard deductions increased substantially for 2025. Married couples filing jointly now claim $31,500, heads of household get $23,625, and single filers deduct $15,750. These higher thresholds mean fewer taxpayers benefit from itemizing, which—paradoxically—makes the year-end tax tips around charitable giving more strategic, not less.
The Child Tax Credit expanded to $2,200 per qualifying child for 2025, with annual inflation adjustments beginning in 2026. This becomes a permanent benefit, though both the taxpayer and child must have valid Social Security numbers to qualify. Families should verify SSN requirements before year-end if they’ve recently added dependents. The IRS is nothing if not particular about paperwork.
Temporary Provisions Through 2028
These provisions create planning opportunities, but only if you use them before they expire:
- Service industry tip deduction: Up to $25,000 in reported tips annually
- Overtime pay deduction: Up to $12,500 individually ($25,000 married filing jointly)—but IRS guidance specifies only the premium portion qualifies
- Auto loan interest deduction: Up to $10,000 for new U.S.-assembled vehicles
- SALT deduction cap increase: From $10,000 to $40,000 for 2025, with 1% annual increases through 2029, then reverts to $10,000 in 2030
All three temporary deductions phase out at higher income levels. The SALT deduction phases out for modified AGI over $500,000.
Business Tax Provisions
The OBBBA restored 100% bonus depreciation for assets placed in service after January 19, 2025. Domestic research and development expenses can now be deducted immediately rather than amortized over five years. Section 179 expensing increased to $1,250,000 for 2025, with the phase-out beginning at $3,130,000 in total equipment purchases. The Qualified Business Income deduction became permanent, allowing eligible business owners to deduct up to 20% of qualified business income. Your accountant just got very excited.
Estate and gift tax exemptions jumped to $15 million per person ($30 million per couple) for 2026, permanently eliminating the scheduled reduction. This creates substantial wealth transfer opportunities for high-net-worth families who’d rather decide where their money goes than let the government decide for them.
Essential Year-End Tax Tips for 2025
Here are some tips for closing this year out well.
Maximize Retirement Contributions
Retirement contributions provide immediate tax reduction. For 2025, you can contribute up to $23,500 to a 401(k), with an additional $7,500 catch-up contribution if you’re 50 or older. IRA contributions max out at $7,000 ($8,000 with catch-up). While you have until April 15, 2026 to fund IRAs, 401(k) contributions must occur by December 31, 2025. Maximizing these contributions reduces your 2025 taxable income while building retirement security. Additional catch-up contributions for those aged 60, 61, 62, and 63 are $11,250.
Strategic Income Timing
Income timing requires careful analysis this year. If you expect similar income in 2025 and 2026, deferring income until January provides a one-year tax deferral benefit—the financial equivalent of kicking the can down the road, except legally encouraged. Business owners using cash-basis accounting can delay invoicing until early January. Employees with year-end bonus control might push payment into 2026. Conversely, if you expect a higher income in 2026, accelerating income into 2025 could reduce your overall tax burden. The math isn’t complicated, but the strategy matters.
Capital Loss Harvesting
Capital loss harvesting offsets gains and reduces ordinary income. You can deduct up to $3,000 in net capital losses against ordinary income ($1,500 if married filing separately), with excess losses carrying forward indefinitely. Review your investment portfolio for positions with unrealized losses. Selling before December 31 generates losses that offset 2025 gains. You can repurchase similar investments after 30 days to avoid wash sale rules. Your portfolio gets a tax-efficient makeover, and the IRS doesn’t send you a thank-you note.
Capture Temporary Deductions
Temporary deductions expire after 2028, making 2025 a critical year to capture these benefits. Service workers should ensure tips are properly reported to maximize the $25,000 deduction. Employees working overtime can deduct the premium portion of overtime pay, which means documenting that “time-and-a-half” calculation matters. Families considering new vehicle purchases should verify U.S. assembly requirements to capture the $10,000 auto loan interest deduction. These provisions won’t last forever, which is the point.
Charitable Giving Strategy
Charitable giving strategy shifts significantly in 2026. Starting next year, itemized charitable deductions face a new 0.5% AGI floor—you can only deduct donations exceeding 0.5% of your adjusted gross income. For 2025, no floor exists. High-income taxpayers should consider bunching multiple years of charitable contributions into 2025 using donor-advised funds. A family that normally donates $15,000 annually could contribute $45,000 to a donor-advised fund in 2025, capturing the full deduction without the 2026 floor, and then distribute grants over three years. It’s called tax efficiency. The charities still get their money, and you keep more of yours.
Business Tax Planning Strategies
Want to plan for max benefits? Here are our top tips.
Section 179 Expensing
Section 179 expensing delivers immediate tax relief for equipment purchases. The $1,250,000 deduction limit for 2025 allows businesses to write off the full cost of qualifying equipment rather than depreciating it over multiple years. Purchases must be completed and placed in service by December 31 to qualify for 2025 deductions—because nothing motivates business investment quite like an arbitrary calendar deadline.
Qualifying assets include machinery, vehicles over 6,000 pounds GVWR, computers, software, and most tangible business property. The deduction cannot exceed your business’s taxable income for the year, though any excess carries forward. Companies approaching the $3,130,000 phase-out threshold need strategic timing—spreading purchases across tax years might preserve more deductions. Your CFO has already started running the numbers.
Bonus Depreciation
Bonus depreciation returned to 100% for assets placed in service after January 19, 2025. Unlike Section 179, bonus depreciation has no dollar limit and doesn’t phase out based on total purchases. It can create or increase net operating losses, providing greater flexibility than Section 179. Combining both strategies allows businesses to maximize first-year deductions on equipment acquisitions. It’s the tax equivalent of a two-for-one sale, except the government subsidizes it.
R&D Expense Deduction
Changes to R&D expense deductions create immediate savings for innovation-focused businesses. Domestic research and experimentation costs can now be deducted in the year incurred rather than amortized over five years. Companies that capitalized R&D expenses under previous rules in 2022-2024 can now accelerate those deductions, creating substantial tax refund opportunities. Work with your tax advisor to determine the optimal acceleration strategy.
Year-End Bonus Timing
The timing of year-end bonuses affects 2025 deductions differently depending on your accounting method. Cash-basis employers deduct bonuses when paid, making December 31 the critical deadline. Accrual-basis employers can deduct bonuses in 2025 if they establish the liability by December 31 and pay within 2.5 months after year-end. Strategic bonus timing balances employee relations, cash flow considerations, and tax optimization. Your employees appreciate the bonus. Your accountant appreciates the deduction. Everyone wins.
Prepaid Expenses
Prepaid expenses offer deduction acceleration under the 12-month rule. Businesses can deduct certain prepaid expenses in the year paid if the benefit period doesn’t extend beyond 12 months after the first day the benefit begins. Insurance premiums, software maintenance contracts, and licensing fees often qualify. Paying January 2026 expenses in December 2025 accelerates the deduction while maintaining a similar cash outflow timing. It’s not creative accounting—it’s just accounting.
What to Look for in a Tax Advisory Firm
Looking for a tax advisory firm? Focus on advisors who think beyond April 15, with multi-year projection capabilities that optimize lifetime tax efficiency across 3-5-year scenarios. Industry expertise matters—construction depreciation strategies differ completely from healthcare compliance requirements or real estate passive loss rules, and generic advice misses these opportunities.
You need proactive planners who call you in October with year-end strategies —not just March document requests —and who understand both federal and state tax integration to avoid expensive surprises when state rules don’t align with federal provisions. The best firms take a big-picture approach, coordinating with your CFO and financial advisors to align tax decisions with business valuation, succession planning, and wealth transfer goals.
Above all, find advisors who communicate complex strategies clearly and present quantified options rather than just telling you what to do—you want a trusted counselor who makes tax planning feel collaborative, not someone reading from the tax code.
Take Action Before December 31
2025 presents extraordinary planning opportunities, but only for those who act before the end of the year. Permanent provisions provide long-term certainty for business and personal planning. Temporary benefits create time-sensitive opportunities that expire after 2028. The transition from 2025 to 2026 rules—particularly around charitable giving—makes strategic timing critical. December 31 will arrive whether you’re ready or not.
Wiss Tax Advisory has guided business owners through tax law changes for 40 years. Our team combines technical expertise with industry-specific knowledge across construction, healthcare, real estate, manufacturing, and professional services. We develop multi-year tax projections that optimize your lifetime tax efficiency while supporting your business and personal financial goals. We also answer our phones, which apparently qualifies as exceptional service these days.
Ready to maximize your 2025 tax savings? Contact Wiss Tax Advisory for a year-end tax planning consultation. Because paying more tax than legally required isn’t noble—it’s just expensive.
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