2025: A Pivotal Year-End for Tax Planning

As a year with meaningful tax law changes comes to a close, it’s a perfect time to review your 2025 tax year, expected 2026 events, and formalize your 2025 tax plan. Thoughtful year-end planning can reduce taxes, memorialize impactful tax benefits, and lay the groundwork for a better financial future. As with prior blog posts, this is tailored toward our clients, and may not be the optimal tax advice for all taxpayers.

• 1) 2025 Tax Change Opportunities

  With the passage of the One Big Beautiful Bill Act in July of 2025, some year-end tax planning items have re-emerged, while other potential tax benefits are sunsetting on 12/31/2025.

  • State and Local Tax (SALT) Review
    The itemized deduction benefit for taxes, including state and real estate taxes, has been increased from $10,000 to $40,000 for tax years 2025 through 2029, subject to an AGI phase-out. This makes accurate and timely year-end planning crucial in maximizing the benefit you receive from SALT taxes paid, especially if your income is expected to significantly fluctuate year-over-year.

  • Charitable Planning
    A few changes are coming to charitable contributions, which you may want to plan around:

    • “Above-the-line” Charitable – Similar to a previous temporary tax benefit in 2020 and 2021, taxpayers who don’t itemize will, as of 2026, be able to take cash charitable contributions as a deduction in addition to their standard deduction. The amount is capped at $1,000 single/$2,000 married filing joint.

    • .5% Charitable Floor – Beginning 2026, taxpayers who usually benefit from itemized charitable deductions will now have those contributions subject to a .5% AGI floor. For example, if you report $500,000 of AGI, the first $2,500 of charitable contributions will be nondeductible.

  • Cryptocurrency
    As the cryptocurrency industry continues to be reviewed and regulated, it’s important to review the potential tax planning opportunities:

    • Broker Reporting – A new form 1099-DA (Digital Asset) has been introduced for the 2025 tax year. There will be additional documentation produced by cryptocurrency brokers and custodians. Tax year 2025 has been deemed a “transition” year, meaning that brokers will not be penalized for failing to provide basis this year. They will be required to report basis to the IRS as of 2026. To be proactive, you might consider taking steps to clean up your records ahead of year-end.

    • Loss Harvesting – As of the date of this blog post, the IRS still treats cryptocurrency as property. One massive implication of this classification is that wash sales do not apply to property. Therefore, even if you want to remain in an asset long-term, you might consider selling and harvesting losses prior to year-end, and you won’t be required to wait 30 days to reacquire the asset. Note that any sale still needs to have economic substance, so we highly recommend discussing with a tax advisor.

    • Charitable Donation – A significant portion of long-term crypto holdings have unrealized appreciation, meaning a sale would result in material gains and an increase in tax. These assets are often a great candidate to evaluate for charitable contributions (see Charitable Giving & Donor-Advised Funds below). However, because cryptocurrency is treated as property (not a security), a valuation is required to substantiate the charitable contribution.

  • Qualified Opportunity Zones (QOZ/QOFs)
    Qualified Opportunity Zones allow for the reinvestment of capital gains within 180 days of sale in order to defer those capital gains up to 5 years, with the opportunity to receive additional tax benefits over time.

  • “Green” Incentives are Sunsetting
    As of the date of this article, many of the “green” tax incentives, including the Clean Vehicle Credit, have already been terminated. The Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit terminate as of 12/31/2025, and any property must be installed and in service before then to qualify for those tax credits. For example, if you’re installing new doors and windows and hoping for a tax credit, you will need to ensure installation is complete before year-end.

  • Incentive Stock Options (ISOs)
    If you hold ISOs, you may be able to exercise a specific number of shares before year-end without generating any additional tax. If you already exercised options earlier this year, an evaluation of potential disqualifying dispositions may help reduce AMT exposure or create liquidity. A qualified tax advisor should be able to help you evaluate any action around your equity/option holdings.

• 2) Income Timing & Deferral

  • Deferring Bonuses or Other Elective Income
    If you have flexibility around when you receive certain income (e.g., bonuses, consulting fees, sale proceeds), consider deferring it into early 2026, particularly if you anticipate 2025 to be an extraordinarily high-income year.

  • Capital Gains
    If you’re looking to sell appreciated assets, weigh whether to realize those gains in 2025 or wait until 2026. This is a discussion to have with both your financial advisor and your tax advisor, as tax is only one piece of the equation in determining when and how to realize gains.

  • Tax Loss Harvesting
    Selling underperforming securities or property to realize losses remains a powerful strategy to offset gains incurred throughout the year. For publicly traded securities, avoid buying “substantially identical” shares within 30 days before or after the sale to prevent wash sale loss suspensions.

  • Installment Sales
    For large transactions such as real-estate sales or business exits, installment sales may help you spread recognition of income over multiple years, managing your taxable income more evenly. There are often risks involved in an installment sale, so this should be discussed thoroughly with tax advisors and attorneys before implementation.

  • Retirement & Other Tax Deferrals
    Many tax-deferred accounts are worth considering in any year, due to additional tax benefits such as tax-free use (HSAs) or tax-deferred gain compounding (IRA/401k). These accounts are specifically beneficial in years that you have high income, as you may be able to defer taxation into lower-taxed years (for example, retirement). Some planning items need to be completed within the tax year, while others (SEP IRA & HSA, for example) can be completed anytime ahead of your original tax filing deadline.

  • Converting Retirement Accounts in Low-Income Years
    If your 2025 income is unusually low (or you expect 2026 to be high), a conversion from a traditional retirement account to a Roth account may make sense, locking in a lower tax rate now and tax-free growth later.

• 3) Accurately Timing Deductions

  • Prepay Certain Deductible Expenses
    You can reduce your taxable income by paying deductible expenses in advance, including rent and insurance, up to a certain limit. You could also consider purchasing property for your business, which may qualify for accelerated/bonus depreciation now and help you grow your business and generate larger returns in future years.

  • Charitable Giving & Donor-Advised Funds (DAFs)
    Charitable contributions are an excellent way to reduce your taxable income. If you plan to give to charity, consider making donations before December 31st. Donor-advised funds allow you to make a charitable contribution and receive a deduction in the current year, while disbursing the funds to charities over time.
    
    Donating highly appreciated capital gain property to a charitable organization or DAF provides several benefits. You receive a tax deduction for the full fair-market value of the donation, while simultaneously never having to pay tax on the appreciation. For example, if you bought $10,000 of NVIDIA stock 5 years ago which is now worth $300,000, donating to a DAF allows you to receive a $300,000 charitable deduction, while never paying tax on the $290,000 appreciation.

  • SALT Considerations
    Depending on your current income level and any AMT adjustments, you may or may not benefit from making an early state or property tax payment ahead of 12/31/2025. Please consult a tax advisor to ensure all appropriate inputs are considered.

• 4) Gifting, Estate & Wealth-Transfer Moves

  • Annual Gift Exclusion
    In 2025, you can gift up to $19,000 per recipient without triggering gift tax reporting. Married couples can combine their exclusions, gifting up to $38,000 to each individual. Take advantage of this exclusion by giving gifts before the year ends.

  • Funding 529 College Plans
    If you have children or other loved ones to support, consider funding a 529 plan for their future education. The annual gift exclusion applies to contributions made to 529 plans, and you can even superfund these plans by contributing five years’ worth of gifts in a single year. Some states allow for a deduction for certain amounts of 529 contributions, meaning that it may be more beneficial to contribute yearly than to superfund.

  • Gifts to Educational and Healthcare Institutions
    Direct payments to educational institutions or medical facilities for a loved one’s tuition or healthcare expenses are not subject to gift tax and do not count against your annual or lifetime exclusions.

  • Understanding When a Gift is Complete
    For tax purposes, a gift is considered complete when it has been "delivered" and the recipient has control over the gift. The mailbox rule states that if you mail a gift before year-end, it is considered complete for the year, even if the recipient does not receive it until the following year.

Conclusion

With impactful tax changes taking effect in 2025, now is the time to review your income, deductions, and accompanying financial events. Because these strategies depend heavily on your individual facts, a brief review of your unique fact pattern with your tax advisor can go a long way. If you'd like help customizing a year-end plan for your specific situation, we'd be happy to work with you to identify optimal strategies.