2025 Individual Year-End Tax Planning
Reference Guide
As 2025 draws to a close, now is the time to take stock of your financial picture and position yourself for success in the year ahead.
With the passage of the One Big Beautiful Bill Act (OBBBA) earlier this year, many provisions from the Tax Cuts and Jobs Act (TCJA) were made permanent, providing much-needed clarity and predictability for individual taxpayers.
Still, several new rules, expiring incentives, and inflation-related adjustments make year-end planning as important as ever.
At Maner Costerisan, our goal is to help you understand how these changes may affect your unique situation and identify opportunities to optimize your tax position before December 31.
Key Legislative Updates
The OBBBA, enacted in July 2025, permanently extended many TCJA provisions, including lower individual tax rates and the increased standard deduction. It also introduced new deductions for seniors, hourly wage earners, and tip workers while phasing out many of the green energy credits created under the Inflation Reduction Act.
While few additional tax changes are expected before year-end, taxpayers should note:
- The expanded Affordable Care Act premium tax credits are still scheduled to expire after 2025.
- IRS balance due/estimated tax payments as well as tax refunds moved to electronic-only options starting September 30, 2025.
- New digital asset reporting requirements take effect in 2025, with Form 1099-DA reporting expected in early 2026.
New Individual Deductions for 2025
The OBBBA introduced several new deductions that apply whether or not you itemize, including:
- $6,000 Senior Deduction – for taxpayers age 65 and older, subject to income limits.
- $10,000 Automobile Loan Interest Deduction – for qualified U.S.-assembled vehicles.
- Tip Income Deduction – available for up to $25,000 in qualified tips.
- Overtime Pay Deduction – for up to $12,500 ($25,000 joint) in eligible overtime earnings.
Each deduction carries income phaseouts and specific requirements. We recommend reviewing eligibility now to ensure the necessary documentation is in place.
Charitable Contribution Planning
Charitable giving remains a powerful way to align your values with tax-efficient planning. Key strategies include:
- Donating appreciated assets instead of cash to avoid capital gains tax and receive a deduction for the fair market value.
- Funding a Donor Advised Fund (DAF) to lock in a current-year deduction while distributing grants to charities over future years.
- Qualified Charitable Distributions (QCDs) from IRAs for those aged 70½ or older- these satisfy required minimum distributions (RMDs) and are excluded from taxable income.
The charitable landscape changes in 2026, with a 0.5% floor on deductions and limits for higher-income taxpayers. Timing your contributions strategically in 2025 may enhance your tax benefits.
State and Local Tax (SALT) Deduction
The SALT deduction cap has been temporarily increased to $40,000 ($20,000 if married filing separately) for tax years 2025 through 2029. This increase will make itemizing more favorable for many taxpayers– especially those in higher-tax states. After 2029, the cap is scheduled to revert to $10,000.
Energy and Green Incentives
Many energy-related tax incentives have been reduced or eliminated under the new law. However, two key credits remain available through year-end:
- Energy Efficiency Home Improvement Credit – equal to 30% of qualified improvement costs (such as windows, doors, and home energy audits) for property installed before December 31, 2025.
- Residential Clean Energy Credit – equal to 30% of costs for installing solar, wind, or battery storage systems, provided expenditures are made before year-end.
If you plan to make qualifying home improvements, now is the time to act.
Retirement Planning Opportunities
Several strategies can help optimize your retirement savings and manage taxable income:
- Increase 401(k) and IRA contributions before year-end. IRA contributions can be made through April 15, 2026.
- Review RMD requirements if you’ve reached age 73. The first RMD can be delayed until April 15 of the following year, but taking two distributions in one year can increase your taxable income.
- Consider Roth IRA conversions to take advantage of current tax rates.
- Qualified Charitable Distributions (QCDs) offer a way to satisfy RMDs while reducing taxable income.
Investments & Capital Gains
Inflation adjustments and stable tax rates for 2025–2026 make income deferral an effective strategy for many taxpayers. Consider:
- Deferring income or accelerating deductions to remain in a lower bracket.
- Harvesting capital losses to offset gains and manage your tax liability.
- Delaying large sales of appreciated assets if your 2026 income will be lower, potentially qualifying you for a lower capital gains rate.
Estate and Gift Tax Planning
The federal estate and gift tax exemption increases to $15 million per person ($30 million per couple) for transfers after December 31, 2025, with future inflation adjustments. The annual gift exclusion rises to $19,000 per recipient.
We encourage clients with significant estates to revisit their wealth transfer strategies while exemptions remain historically high.
Digital Asset Reporting
Beginning with 2025 transactions, new IRS reporting requirements apply to digital assets, including cryptocurrencies and NFTs. Taxpayers will begin receiving Form 1099-DA in early 2026.
Even if you don’t receive a form, you are responsible for reporting all taxable digital asset activity. Keep detailed records of purchases, sales, and exchanges to ensure accuracy.
Other Year-End Considerations
- Education planning – Contribute to or establish 529 plans before year-end to benefit from potential state tax advantages.
- Health savings accounts (HSAs) – Maximize contributions to reduce taxable income and cover future healthcare expenses.
- Withholding and estimated taxes – Review payments to avoid underpayment penalties (currently accruing at 7% interest).
- Life changes – Marriage, divorce, job changes, or new dependents can all impact your tax picture. Let us know of any major updates.
Plan Now to Avoid Surprises Later
Thoughtful year-end planning can help you minimize surprises, preserve wealth, and enter 2026 with confidence. The team at Maner Costerisan is here to guide you through these changes and help identify the best strategies for your goals.
Please get in touch with us at maner@manercpa.com to set up your year-end review.
