As 2025 is quickly coming to a close, individuals and business owners alike are turning their attention to year-end tax planning. Employing the right tax planning strategies is essential for reducing your tax liability and positioning yourself for financial success in the year ahead. This year, the landscape is especially dynamic with the introduction of the One Big Beautiful Bill Act (OBBBA), which brings significant updates to deductions, credits, and business reporting requirements.
Understanding how these new provisions interact with existing tax rules is key to optimizing your strategy. Whether you are looking to maximize deductions, manage timing of income and expenses, or take advantage of new incentives under OBBBA, careful year-end planning can make an impactful difference in your bottom line.
Individual Tax Planning Strategies
For individuals, strategic year-end planning can help you reduce taxable income and take advantage of new opportunities introduced under the OBBBA. From maximizing retirement contributions to leveraging charitable deductions and reviewing investment gains or losses, small adjustments before year-end can lead to meaningful savings. Below are key individual tax planning strategies to consider for 2025:
| Strategy | Rationale | Limitations |
|---|---|---|
| Maximize contributions to tax-advantaged retirement accounts | Contribute to retirement accounts like IRAs or 401(k)s to reduce your taxable income. | Be aware of contribution limits, income eligibility, and Roth vs. traditional account differences. |
| Health Savings Accounts (HSAs) / Flexible Spending Accounts (FSAs) | Contributions to HSAs or FSAs reduce taxable income; HSAs also allow tax-free growth and withdrawals (for qualified medical expenses). | Must have a high-deductible health plan (for HSA), and FSA funds often must be used within a year (or grace period). |
| Tax-loss harvesting / capital gain management | Harvest investment losses to offset capital gains or up to $3,000 of ordinary income, and plan the timing of asset sales to benefit from lower capital gains tax rates. | Be mindful of wash-sale rules, holding period requirements, and how transactions may affect AMT or other taxes. |
| Charitable giving strategies | Donate cash or long-term appreciated assets to claim a deduction for fair market value without recognizing gain. Consider using donor-advised funds or bunching contributions across years to maximize tax benefits. | Must itemize (or exceed standard deduction), and be mindful of deduction ceilings Also, the timing of gifts matters. |
| Itemized vs. standard deduction | If your allowable itemizable deductions (mortgage interest, state/local taxes, charitable gifts, medical expenses, etc.) exceed the standard deduction, itemizing typically yields more tax savings. | Certain deductions like SALT remain limited using the standard deduction. However, we expect more people will itemize to take advantage of OBBBA provisions. |
| Timing income and deductions | Accelerate or defer income / deductions into years with lower or higher marginal tax rates. For example, delay recognition of bonus, or accelerate deductible expenses (state tax payments, business-related expenses) before year-end. | Be careful of AMT, phase-ins or phase-outs, and ensure the deferral or acceleration is allowed under rules. |
| Adjust withholding / estimated tax payments | Ensure you are not overpaying or underpaying taxes throughout the year. Adjust W-4 or estimated tax payments to optimize cash flow. | Underpayment penalties may apply, so be sure to meet safe harbor payment requirements. |
| Utilize credits | Tax credits (child tax credit, education credits, energy credits, etc.) are ways to reduce tax liability dollar-for-dollar. | Many credits have phase-outs or eligibility rules. |
| Shifting income or deductions (family, trusts, gifts) | Shift income to family members in lower tax brackets (within gift tax limits), use family trusts, or grantor trusts, especially for estates. | Must consider gift tax rules, IRS “kiddie tax,” attribution rules, and state-level rules. |
| Estate and gift tax planning | Use annual gift exclusions, lifetime gift exemption, trusts, GRATs, etc., to reduce taxable estate. | The federal exemption and rules change over time; state-level estate taxes may also apply. |
What’s New or Changed under the One Big Beautiful Bill Act (for Individuals)
The OBBBA introduced or modified several individual-tax provisions. Some of these open new planning possibilities; others make previously temporary rules permanent. Key changes:
1. Overtime deduction
- If you earn “time-and-a-half” overtime pay above your regular salary, you can deduct that extra pay on your taxes up to $12,500 for individuals or $25,000 for couples filing jointly. This is a new deduction introduced by the OBBBA.
2. Interest on personal auto loan deduction
- You can deduct interest on a loan for a qualifying personal vehicle (not leased) up to $10,000, though the deduction may be reduced if your income is high.
3. Higher SALT deduction cap (temporarily increased)
- State and local tax (SALT) deductions were previously capped at $10,000. The OBBBA temporarily raises this cap to $40,000 in 2025 and 2026, with small increases through 2029, before dropping back to $10,000. This is especially helpful for taxpayers in high-tax states and may make itemizing deductions more worthwhile during these years.
4. Standard deduction and tax rate permanence
- The OBBBA keeps the TCJA’s tax rates and brackets permanent, preventing them from expiring. The standard deduction continues to be available and is adjusted for inflation. Taxpayers 65 and older can claim an extra $6,000 deduction (through 2028, subject to phaseouts).
5. Expansion / permanence of credits & other individual rules
- The child tax credit increases from $2,000 to $2,200 and is now permanent. Some other tax benefits, like certain clean energy and electric vehicle credits, have been changed or reduced under the OBBBA.
Business Tax Planning Strategies
For businesses, year-end tax planning is an opportunity for you to strengthen cash flow, reduce tax liability, and prepare for the new compliance standards under the OBBBA. Advanced planning such as managing the timing of income and expenses, leveraging available deductions and credits, and reviewing equipment purchases or depreciation elections can make a significant impact. Below are key business tax planning strategies to consider for 2025:
| Strategy | Rationale | Limitations |
|---|---|---|
| R&D expensing / credits | Claim R&D credits and/or immediate expensing of R&D expenditures to reduce tax. | You must satisfy strict documentation and qualified research tests. Some expenditures must be capitalized/amortized under prior law. |
| Interest expense limitation planning | Tax rules limit how much loan interest a business can deduct, so it’s important to plan your mix of debt and equity. | Be careful with thin capitalization rules, allocation rules, and forward/limitations. |
| Entity choice / pass-through vs. C corp trade-off | Choosing the right business structure (C corp, S corp, partnership, or LLC) depends on tax rates, available deductions, and overall business goals. | Be sure to weigh factors like double taxation for C corps, the qualified business income deduction for pass-throughs, and your need for flexibility and risk protection. |
| Income shifting / transfer pricing (for related entities) | Move profits (in compliance with arm’s-length rules) to jurisdictions or affiliates with lower tax rates; use intercompany contracts and transfer pricing. | Must comply with IRS and international rules (transfer pricing, BEPS, etc.). |
| Use of tax credits | Energy credits, investment credits, low-income housing credits, etc. | Many credits are nonrefundable or subject to phaseouts, recapture rules, or alternative minimum tax constraints. |
| NOL carryforwards / carrybacks | Use net operating loss carryforwards (or carrybacks if allowed) to offset taxable income in other years. | There are various limits, expiration dates, and ordering rules to keep in mind, especially under the TCJA and later updates. |
| Timing of income and deductions | Accelerating or deferring revenue, deferring expenses or prepaying (when allowed) to manage tax burdens across years. | Must follow accrual vs. cash accounting rules, and respect IRS timing rules. |
| Structuring of compensation / fringe benefits | Use tax-deductible benefits, qualified retirement plans, deferred compensation, or deductible perks (e.g., health insurance, meals/travel). | Must meet nondiscrimination rules, “reasonable compensation” rules for S or C corps, and limits on certain fringe benefits. |
| Multistate / state tax planning | Plan for state taxes by managing where your business has nexus, taking advantage of state credits and incentives, and optimizing how and where profits are reported. | State law complexity, compliance costs, and potential challenges by states. |
| International tax planning | Plan your international taxes by using foreign tax credits, managing income deferral, structuring subsidiaries wisely, and taking advantage of treaties and other planning opportunities. | These rules are highly complex (covering areas like Subpart F, GILTI, and BEAT) and are frequently updated and closely reviewed by the IRS. |
What’s New or Changed Under the OBBBA for Businesses
The OBBBA made a number of changes (some temporary, some permanent) to business taxation that affect planning opportunities. Some of the most significant are:
1. Permanent full expensing / “bonus depreciation” (100 %)
- Businesses can now permanently deduct the full cost of many new business assets right away, instead of spreading the deduction over several years. This makes it easier and more attractive to invest in new equipment or property.
2. R&D / research & experimental (R&E) expense immediate deduction
- Domestic research and development costs can now be deducted immediately, rather than being spread out over five years. This is a new / reinstated favorable treatment and can be a big boost for R&D-heavy businesses.
3. Modification to business interest limitation rules
- OBBBA modifies the limitation on business interest expense deductions and it changes how “deduction-eligible income” is calculated and adjusts allocations. This allows for more interest deduction “room” for some businesses.
4. Corporate charitable contribution floor
- Starting after 2025, corporations must give at least 1% of taxable income to charity to claim a deduction, but can still carry forward excess contributions above 10% for up to five years.
5. Changes in international tax / BEAT / look-through / foreign deductions
- The Base Erosion and Anti-Abuse Tax (BEAT) rate is permanently lowered to 10.5%, and rules for certain foreign income deductions are made more favorable and permanent.
6. Qualified Business Income (QBI) / Section 199A pass-through deduction made permanent and modified
- The 20% deduction for pass-through business income is now permanent. Thresholds for phase-ins are increased, and a small minimum deduction applies for businesses with modest QBI.
7. Extension and increase of Section 179 expensing limits
- OBBBA increases the maximum dollar amount you can take to $2.5 million, phasing out at $4 million. These thresholds will be indexed for inflation starting in 2026.
8. Estate/gift & generation-skipping tax changes affecting business-owners / succession
- Exemptions are permanently raised to $15 million (inflation-adjusted), helping business owners transfer family businesses more tax efficiently.
9. Other modifications / rollbacks of certain clean energy incentives
- Some credits and incentives for clean energy that were generous under prior law are curtailed or changed under OBBBA, which can affect planning for businesses in the energy and environment sectors.
10. Excess business loss limitation made permanent
- The prior limitation on “excess business losses” is made permanent by OBBBA.
About Community CPA
Every taxpayer’s situation is unique and with the new provisions under the One Big Beautiful Bill Act (OBBBA), personalized planning matters more than ever. Whether you are an individual weighing itemized deductions or a business exploring new investment and R&D opportunities, the right strategy can make a real difference in your bottom line. As many of these benefits are temporary, smart timing and coordination are key. At Community CPA, our experienced tax professionals can help you model different scenarios, uncover hidden opportunities, and build a strategy that fits your goals. Schedule an appointment today to make sure you’re getting the most from these changes.
