Category: Year-End Tax Planning

As 2025 winds down, tax season looms, and focusing on compliance and documentation is crucial for a smooth filing process. By prioritizing organized records, timely estimated tax payments, and awareness of tax law changes, you can avoid penalties and potentially reduce your tax burden. Here’s what you need to know to stay on track this November and December.

KEEP DETAILED RECORDS FOR DEDUCTIBLE EXPENSES

Accurate documentation is the foundation of claiming tax deductions effectively. For medical expenses, retain receipts for doctor visits and prescriptions. Business owners should maintain records of expenses like office supplies, travel costs, or equipment purchases to substantiate deductions. If you claim mileage, a detailed log with dates, destinations, and the purpose of each business trip is essential.

Consider using tools like QuickBooks or MileIQ to simplify tracking and ensure compliance with IRS requirements. Well-organized records not only support your deductions but also make the filing process more efficient.

MEET ESTIMATED TAX PAYMENT DEADLINES

For self-employed individuals, freelancers, or those with significant investment income, staying on top of estimated tax payments is critical. The fourth-quarter payment for 2025 is due January 15, 2026, and missing it could result in penalties. Review your year-to-date income and withholding to calculate the correct payment amount.

Consulting with a tax professional can help you estimate your tax liability accurately, ensuring you avoid underpayment issues when filing your return.

STAY INFORMED ON TAX LAW CHANGES

Tax laws are constantly evolving, and 2025 introduces updates through the One Big Beautiful Bill Act to deduction limits, credits, and reporting requirements that could impact your filing. Staying informed about these changes ensures you remain compliant and can take advantage of new opportunities to optimize your tax outcome.

Work with your tax professional to review your records, confirm payment schedules, and adapt to any regulatory updates. By taking these steps now, you’ll set yourself up for a stress-free and successful tax season.

As the year draws to a close, taxpayers should review their finances to optimize tax efficiency. One key strategy is maximizing retirement contributions, such as contributing to an IRA or 401(k), which can lower taxable income. Charitable donations also offer tax deductions; making donations before year-end can reduce your tax liability.

Reviewing capital gains and losses allows taxpayers to offset gains with losses, minimizing taxes on investments. Consider bunching deductible expenses, like medical costs or property taxes, to surpass the standard deduction threshold.

Tax-loss harvesting involves selling underperforming assets to realize losses, offsetting gains elsewhere.

Consult with your tax professional to ensure these strategies align with your individual circumstances before year-end for potential tax savings.

If you own a small business, reducing your 2025 tax bill and planning for a successful new year should be on your radar as the current year draws to a close.

CHECK YOUR RECORDS

Start by making sure your books are accurate and up to date. Consult your tax professional to resolve any questions you have before tax season arrives, so you’re not left trying to sort things out at the last minute. Reviewing both your income statement to get a handle on profits and losses and your cash flow statement to see how money was spent can help you plan for next year.

DEFER INCOME

One way to lower this year’s tax bill is by deferring income to the beginning of 2026. This tactic makes sense, especially if you expect your income to be less next year.

INCREASE DEDUCTIONS

Purchasing supplies in advance and upgrading equipment before the end of the year may help you maximize deductions on your 2025 return, assuming you pay for them before year’s end.

CONTRIBUTE TO A RETIREMENT PLAN

You can reduce your 2025 income by making contributions to your retirement plan. Contribution limits vary, depending on the type of plan. Your financial professional can let you know how much you can contribute.

CONSIDER YOUR WORKSPACE

If you’re self-employed or you work from home and have a dedicated room or space for conducting business, you may be eligible to take the home office deduction. Rules for claiming the deduction are specific, so consult your tax advisor.

DEDUCT BAD DEBT

On occasion, your business may have customers who have not paid you for goods or services within a reasonable period. If you have unpaid invoices and no reasonable expectation of payment, you may be able to deduct the debt on your tax return.

REVISIT YOUR GOALS

Year’s end is an appropriate time to look at the goals you set for the year and assess whether you achieved them. If your goals fell short of your expectations, determine the reasons. Then think about the steps you can take in the new year to position your company to thrive.

As the year draws to a close, it’s time to maximize your current year’s tax deductions and other tax planning opportunities. Here’s a brief checklist of moves you can make to help reduce current or future tax exposure.

BUSINESS EXPENSES

You may be able to reduce your 2024 tax bill by pre-paying certain business expenses before the year’s end. For example, you can renew subscriptions, pay ahead for advertising, business insurance premiums, rent, business licenses, and other items that don’t extend more than 12 months.

EQUIPMENT

Repair broken equipment and physical plant items by the end of the year. Buy business equipment and put it into service by year’s end. Your business can deduct the entire cost of qualified equipment up to a purchase limit of $1,220,000 for tax year 2024.

MAXIMIZE QBI DEDUCTIONS

If you meet certain income limits, owners of S corporations, partnerships, and sole proprietorships may deduct up to 20% of qualified business income (QBI).

For tax year 2024, eligibility for the deduction begins to phase out at income levels of $191,950 for single filers and $383,900 for joint filers.

If you’re over the income threshold, consider finding some more deductions.

Ideally, you have strived to minimize your taxes all year. Good news! Here are some year-end strategies that may help cut your tax bill even more. Before implementing these or any year-end strategies, talk with your tax advisor.

DEFER OR ACCELERATE INCOME

Project whether you’ll have higher taxable income in 2024 or 2025. If it’s 2025, consider receiving any potential bonus, investment and other supplemental income this year.

Do the opposite if, for example, you’ll have fewer dependents to deduct next year, have a spouse taking leave, suffer business losses, etc., resulting in having less taxable income in 2025.

BUNCH DEDUCTIONS

For instance, if medical expenses for 2024 year exceed the deductible minimum threshold of 7.5% of adjusted gross income (AGI), squeeze in medical expenses planned for 2025 to maximize tax 2024 savings.

Before bunching any expenses into 2024, consider your overall tax bracket for this tax year and 2025. If you anticipate income increasing enough in 2025 to put you in a higher bracket, it may make sense to postpone a deduction.

TOP OFF YOUR CONTRIBUTIONS

You have until the April 15, 2025, tax filing deadline to make Health Savings Account (HSA) contributions for this year. If you have not already maximized your contribution, do so. Contributions and earnings are generally excluded from taxable income.