As we approach the end of the year, business owners should take a fresh look at their tax positions – for the business and for themselves – to identify opportunities to manage and optimize tax strategies. The recent OBBBA introduced several meaningful tax planning strategies for tax year 2025, while also prompting taxpayers to prepare for some significant changes in 2026.
The tax strategies below highlight some of the more significant planning items to evaluate before year-end.
Business Tax Strategies for Year-End Planning
- Capital Expenditures: Calculate the tax benefit of bonus depreciation (100% expensing of certain fixed assets) on current year income to help manage tax cash flow.
- Business Interest Expense: Evaluate the allowable business interest expense given recent changes from the OBBBA.
- State Pass-Through Entity Tax (PTET): Calculate state and local taxes for the business and look to optimize on PTET strategies.
- Research & Development: Coordinate with your advisors on current year Research & Development projects and factor in the changes to the capitalization requirement for the 2025 tax year calculations.
Individual Tax Strategies for Year-End Planning
- Tax Bracket Management: Factor in business income, compensation, and investment income, and look to accelerate deductions and/or defer income (where possible) to manage your tax bracket.
- Qualified Business Income Deduction (QBID): Business owners should look to optimize the QBID pass-through benefit by calculating business income and individual income. Certain taxpayers could be subject to phase-outs of the QBID benefit and year-end tax planning could provide for opportunities to mitigate any phase-outs.
- Retirement Account Planning: Max out employer plans and look to Traditional and Roth Individual Retirement Accounts as an additional planning tool.
- IRA Planning: Evaluate opportunities for ROTH conversions, including back-door ROTH conversions.
- Charitable Planning: Consider bunching charitable contributions to manage current year taxable income, while also considering the impact of the charitable deduction changes effective January 1, 2026. Read more about bunching contributions here.
- State and Local Tax Deduction: For the 2025 tax year, the maximum federal deduction for state and local taxes (SALT) has increased to $40,000 for most filers, up from $10,000 previously. SALT includes state and local income taxes, property taxes, and real estate taxes. However, the $40,000 limit is subject to a phaseout if your modified adjusted gross income exceeds certain thresholds, starting at $500,000.
For taxpayers with MAGI of $600,000 or more, the deduction reverts to the original $10,000 cap. Tax bracket management could provide for optimizing this tax benefit.
- Qualified Charitable Distributions: Individuals with required minimum distributions (RMDs) may want to consider a direct transfer to a charitable organization to satisfy their RMD for the 2025 tax year. Note, an annual limitation of $108,000 per taxpayer applies for the 2025 tax year.
- Educational Funding: IRC 529 plan accounts still provide for an effective and efficient planning tool. Taxpayers can fund the accounts for family and non-family members.
The account can be used for qualified higher education expenses, and as a result of the OBBBA, the definition of “qualified higher education expenses” has expanded to include (1) a broad category of postsecondary credentialing expenses, and (2) certain expenses incurred in connection with the enrollment or attendance at an elementary school or secondary public, private, or religious school, or in connection with homeschooling.
Additionally, the K-12 annual tuition cap is increased to $20,000 (from $10,000), beginning in 2026.
Guidance for Year-End Tax Planning from Kreischer Miller’s Tax Specialists
As you evaluate these strategies and consider how the OBBBA may impact your business and individual tax picture, now is the time to take a proactive approach. Every company’s situation is unique, and thoughtful planning before year-end can make a meaningful difference in both your 2025 and 2026 outcomes.
If you’d like support navigating these opportunities, our team is here to help. Talk to your Kreischer Miller relationship professional or any member of our Tax Strategies team about your year-end plan.