Year-End Tax Planning Guide 2025

New Temporary Tax Deductions for 2025–2028

The IRS has introduced several temporary deductions that could provide significant tax savings:

Tips: Deduct up to $25,000 in qualified tip income.
Overtime pay: Deduct up to $12,500 (or $25,000 for joint filers) of overtime premium pay.
Vehicle loan interest: Deduct up to $10,000 of interest on loans for new, U.S.-assembled vehicles.
Senior deduction: An additional $6,000 deduction is available for taxpayers age 65 or older.

Each deduction has income phase-outs and eligibility requirements. If these apply to your situation, we can help you confirm eligibility and maximize your benefits.

Charitable Contribution Planning: Give Smart, Save Smart

With changes to the charitable deduction taking effect in 2026, it’s important to strategize your giving now. Consider these tax-smart approaches:

Donate appreciated assets – Instead of cash, donate long-term appreciated securities to avoid capital gains and claim a fair market value deduction.
Open a Donor Advised Fund (DAF) – Secure a tax deduction this year while distributing funds to charities over time.
Use Qualified Charitable Distributions (QCDs) – For those over 70½, QCDs from IRAs satisfy RMDs and are excluded from taxable income.

Tip: Keep detailed records for all donations, including acknowledgment letters for gifts of $250 or more.

Energy Tax Credits and Green Incentives

Federal tax credits for clean vehicles, solar panels, and home energy efficiency upgrades are expiring or phasing out soon. If you’re planning eco-friendly improvements, consult with us first to confirm whether your purchase still qualifies for available energy tax credits.

Estate and Gift Tax Planning for 2025 and Beyond

The federal estate and gift tax exemption will increase to $15 million per person ($30 million per couple) starting in 2026, with inflation adjustments to follow.

Additionally, the annual gift exclusion rises to $19,000 per recipient for 2025 and 2026.

These changes may create powerful estate planning opportunities. We can help you review your estate plan to align with your long-term wealth transfer goals.

State and Local Tax (SALT) Deduction Increases

From 2025 through 2029, the cap on the state and local tax (SALT) deduction temporarily rises to $40,000 ($20,000 if married filing separately). A phase-down will apply to higher-income earners.

After 2029, the cap returns to $10,000. This temporary increase may impact whether you choose to itemize or take the standard deduction — an important consideration for year-end tax planning.

Digital Assets and Cryptocurrency Reporting

Beginning with 2025 transactions, the IRS will implement new reporting requirements for digital assets, including cryptocurrencies, NFTs, and stablecoins.

You may receive a new Form 1099-DA in early 2026 from brokers or digital asset platforms. However, you are still responsible for reporting all taxable transactions, even if you do not receive a form.

Keep detailed records of:

Purchases and sales
Token exchanges
Transfers between wallets

The IRS continues to increase its focus on digital assets — let us help ensure your reporting is complete and compliant.

IRS Electronic Payments: What You Need to Know

Starting September 30, 2025, all federal disbursements — including IRS refunds — will be made electronically, per a new executive order. Paper checks will be phased out.

We recommend reviewing your current refund and payment preferences to ensure a smooth transition and prevent refund delays.

Year-End Tax and Financial Planning Checklist

As you finalize your 2025 tax plan, make sure you also address key financial items:

Retirement contributions – Maximize contributions to IRAs, Roth IRAs, and 401(k)s.
Health Savings Accounts (HSAs) – Use HSAs to reduce taxes and save for medical expenses.
Life events – Update your plan for major changes like marriage, divorce, births, or home purchases.
Capital gains management – Offset gains with losses to minimize taxable income.
Education planning – Fund Section 529 plans and understand updated usage rules.
Beneficiary updates – Review insurance policies and retirement accounts.
Required Minimum Distributions (RMDs) – Take mandatory withdrawals by year-end if age 73 or older.
Roth IRA conversions – Consider converting while tax rates remain low.
Estimated tax payments – Review withholdings; underpayment interest rates are currently 7%.

Plan Ahead and Avoid Surprises

Proactive year-end planning means fewer surprises and greater peace of mind. Our team is committed to helping you navigate tax law changes, optimize your deductions, and align your financial strategy with your goals.

Contact us at 860-496-8119 to schedule your personalized 2025 year-end tax review.
Together, we’ll identify opportunities, address concerns, and build a stronger financial future.

Thank you for trusting us as your advisors.