2025 Year-End Tax Planning & Strategies
Congress passed the One Big Beautiful Bill Act (OBBBA) earlier this year which made many prior temporary tax provisions permanent and added several new deductions that could possibly lower your taxes.
Below is an overview of the most relevant updates and year-end planning ideas to help you make informed decisions. Please remember that everyone’s situation is different, and while this information is designed to help you identify opportunities, not every topic will apply to you.
🟢 New Tax Deductions and Credits for 2025
Senior Tax Deduction
If you’re age 65 or older, you may now qualify for a new $6,000 deduction starting in 2025.
No Tax on Tips
Certain cash tips in eligible occupations—like restaurant servers, hairstylists, or bartenders—can now be deducted up to $25,000 per year.
No Tax on Overtime Pay
Overtime pay can now be deductible up to $12,500 ($25,000 for married filing jointly).
Car Loan Interest Deduction
Interest on loans for new personal-use vehicles may now be deductible up to $10,000 through 2028.
Expanded SALT Deduction (State and Local Taxes)
Good news for taxpayers in higher-tax states: the deduction limit for state and local taxes has increased to $40,000 for 2025 (previously $10,000).
The prior $10,000 cap under the old law significantly impacted many of our clients who itemized on Schedule A, especially those living in income-tax states or with high property taxes. This new higher limit may restore a meaningful benefit for many taxpayers who previously were impacted by the former $10K limit, or it prevented them from itemizing entirely.
💡 Individual Planning StrategiesReview Your Income and Expenses
Check whether deferring income (like a bonus) or accelerating certain deductions this year could help. The right choice depends on your expected income next year—so timing can make a big difference.
Capital Gains and Losses
If you sold investments at a gain, consider selling others that are currently down in value to offset those gains.
Example: Selling a stock at a $5,000 loss can offset a $5,000 gain elsewhere—saving you tax on that income.
Retirement Contributions
Maximize contributions to your 401(k), IRA, or SEP IRA before year-end. These reduce taxable income while helping you build long-term savings.
Charitable Giving
If you want to give to charitable causes, donating appreciated assets (like stock or real estate) instead of cash can give you a double benefit--no capital gains tax on the appreciation, plus a deduction for the full market value.
Donor-Advised Funds (DAFs)
If you’re planning larger charitable gifts, consider a Donor-Advised Fund (DAF)—a charitable account offered by most major investment firms (such as Fidelity, Schwab, or Vanguard). You can contribute cash or appreciated stock now, receive an immediate tax deduction for the full amount, and then direct grants to charities over time. This can be an excellent way to “bunch” charitable deductions into a single year for tax purposes while spreading your actual donations to the charities you specify over multiple years.
Required Minimum Distributions (RMDs)
If you’re age 73 or older, make sure you take your RMDs by year-end to avoid penalties.You can also give directly to charity from your IRA (a Qualified Charitable Distribution), which could satisfy your RMD without increasing your taxable income. Contact your plan administrator to pursue this option.
Enhanced Child Tax Credit
The Child Tax Credit has been increased to $2,200 per child starting in 2025 and is now permanent, with annual inflation adjustments beginning in 2026.
🏠 Estate and Gift Planning
⏰ Timing and Deduction Strategies
“Bunching” Deductions
If you normally take the standard deduction, review your prior year tax return (available in your portal) to see whether you itemized on Schedule A.
🤝 Final Thoughts and Next Steps
We hope this article gives you a clear overview of the most important tax changes and opportunities heading into year-end. Our goal is to help you understand where you might benefit—without requiring complex analysis or projections in most cases.
Thank you for the trust you place in us each year. We look forward to helping you take full advantage of these new opportunities and position yourself for a strong start to 2026.
Below is an overview of the most relevant updates and year-end planning ideas to help you make informed decisions. Please remember that everyone’s situation is different, and while this information is designed to help you identify opportunities, not every topic will apply to you.
🟢 New Tax Deductions and Credits for 2025
Senior Tax Deduction
If you’re age 65 or older, you may now qualify for a new $6,000 deduction starting in 2025.
- Both spouses may claim the deduction if both are 65+.
- Phases out for income above $75,000 (single) or $150,000 (married).
- Example: If your income is $10,000 above the $75K/$150K limit, the deduction reduces by $600 (6% × $10,000), and so on.
No Tax on Tips
Certain cash tips in eligible occupations—like restaurant servers, hairstylists, or bartenders—can now be deducted up to $25,000 per year.
- Must be properly reported to your employer.
- Applies only to occupations where tipping was customary before 2025.
- Caution - The IRS will be closely examining prior year wage and tip income to check for taxpayers who suddenly report higher tip income in 2026.
No Tax on Overtime Pay
Overtime pay can now be deductible up to $12,500 ($25,000 for married filing jointly).
- Applies to overtime hours that exceed your regular rate under federal labor law.
- Example: If your regular pay is $25/hour and overtime is $37.50/hour, the “extra” $12.50/hour may qualify.
Car Loan Interest Deduction
Interest on loans for new personal-use vehicles may now be deductible up to $10,000 through 2028.
- Applies to new vehicles assembled in the U.S.
- Phases out for incomes above $100,000 (single) or $200,000 (married).
Think of this as a smaller version of the mortgage interest deduction—but for your car loan.
Expanded SALT Deduction (State and Local Taxes)
Good news for taxpayers in higher-tax states: the deduction limit for state and local taxes has increased to $40,000 for 2025 (previously $10,000).
- Rises slightly each year through 2029, then reverts in 2030.
- Phases down for higher incomes (over $250,000 single / $500,000 MFS), but never below $10,000.
The prior $10,000 cap under the old law significantly impacted many of our clients who itemized on Schedule A, especially those living in income-tax states or with high property taxes. This new higher limit may restore a meaningful benefit for many taxpayers who previously were impacted by the former $10K limit, or it prevented them from itemizing entirely.
💡 Individual Planning StrategiesReview Your Income and Expenses
Check whether deferring income (like a bonus) or accelerating certain deductions this year could help. The right choice depends on your expected income next year—so timing can make a big difference.
Capital Gains and Losses
If you sold investments at a gain, consider selling others that are currently down in value to offset those gains.
Example: Selling a stock at a $5,000 loss can offset a $5,000 gain elsewhere—saving you tax on that income.
Retirement Contributions
Maximize contributions to your 401(k), IRA, or SEP IRA before year-end. These reduce taxable income while helping you build long-term savings.
Charitable Giving
If you want to give to charitable causes, donating appreciated assets (like stock or real estate) instead of cash can give you a double benefit--no capital gains tax on the appreciation, plus a deduction for the full market value.
- Note that beginning in the 2026 tax year, charitable deductions must exceed 0.5% of income to count, and non-itemizers can deduct up to $1,000 ($2,000 if married). If this might impact you, you may want to consider accelerating any donations you planned in 2026 and making those donations in 2025.
Donor-Advised Funds (DAFs)
If you’re planning larger charitable gifts, consider a Donor-Advised Fund (DAF)—a charitable account offered by most major investment firms (such as Fidelity, Schwab, or Vanguard). You can contribute cash or appreciated stock now, receive an immediate tax deduction for the full amount, and then direct grants to charities over time. This can be an excellent way to “bunch” charitable deductions into a single year for tax purposes while spreading your actual donations to the charities you specify over multiple years.
Required Minimum Distributions (RMDs)
If you’re age 73 or older, make sure you take your RMDs by year-end to avoid penalties.You can also give directly to charity from your IRA (a Qualified Charitable Distribution), which could satisfy your RMD without increasing your taxable income. Contact your plan administrator to pursue this option.
Enhanced Child Tax Credit
The Child Tax Credit has been increased to $2,200 per child starting in 2025 and is now permanent, with annual inflation adjustments beginning in 2026.
🏠 Estate and Gift Planning
- Gift Tax Exclusion: You may gift up to $19,000 per person in 2025 without using any of your lifetime exemption.
- Estate Tax Exemption: The OBBBA permanently increases the lifetime exemption to $15 million per person (indexed for inflation) starting in 2026.
Example: A married couple could now pass up to $30 million free of federal estate tax. - Review your beneficiary designations annually on all bank, investment, and retirement accounts to ensure they align with your wishes.
⏰ Timing and Deduction Strategies
“Bunching” Deductions
If you normally take the standard deduction, review your prior year tax return (available in your portal) to see whether you itemized on Schedule A.
- If you took the standard deduction last year, you might benefit from bunching this year’s charitable donations (and possibly next year’s) into 2025 so that you can itemize this year and take the standard deduction again in 2026.
- Tip: A copy of your prior tax return is available in your portal: https://cwatax.sharefile.com/
🤝 Final Thoughts and Next Steps
We hope this article gives you a clear overview of the most important tax changes and opportunities heading into year-end. Our goal is to help you understand where you might benefit—without requiring complex analysis or projections in most cases.
Thank you for the trust you place in us each year. We look forward to helping you take full advantage of these new opportunities and position yourself for a strong start to 2026.
