As 2025 draws to a close, there is still time to make smart tax moves before the new year begins.
The passage of the One Big Beautiful Bill (OBBB) in July 2025 brought significant changes to tax laws, many of which have been extended or enhanced. Below are key strategies to consider for maximizing your tax benefits before December 31.
1. Maximize Your SALT Deduction
Increased Cap: The SALT (State and Local Tax) deduction cap has risen from $10,000 to $40,000 for both single filers and those married filing jointly in 2025.
Action Step: If you expect to itemize deductions, pay all state and local taxes—including real estate taxes—by December 31 to take full advantage of the increased cap.
Phaseout Alert: The deduction begins to phase out when your modified adjusted gross income (MAGI) reaches $500,000. For example, if your MAGI is $510,000, your SALT deduction may be partially reduced.
2. Optimize Charitable Giving
Bunch Donations: Consider grouping charitable donations into 2025 to maximize your deduction before new limitations take effect in 2026.
Donor-Advised Funds & Appreciated Assets: Explore donor-advised funds or donate appreciated assets like stock for additional tax benefits.
Qualified Charitable Distributions (QCDs): If you are age 70½ or older, you can transfer up to $108,000 from IRAs directly to a qualified charity, reducing your taxable income.
3. Retirement Account Strategies
401(k) Contributions: The maximum deferral for 2025 is $23,500 if you are under 50. If you are 50 or older, you can contribute an additional $7,500, and those aged 60–63 can add $11,250 as a catch-up contribution.
Year-End Bonus: If you expect a bonus in December, ask your payroll department to allocate it toward maximizing your retirement contributions.
Roth IRA Conversions: If your income is lower in 2025 than in future years, consider converting traditional IRAs to Roth IRAs. The conversion amount is taxed as ordinary income, but future required minimum distributions (RMDs) are eliminated for the converted amount once you reach age 73.
4. Roth IRA Options for High-Income Taxpayers
Backdoor Roth IRA: If your income exceeds the Roth IRA limits ($230,000–$246,000 for joint filers), you can contribute after-tax dollars to a traditional IRA and then convert that amount to a Roth IRA.
5. Manage Capital Gains and Losses
Capital Gains Rates: The 0% rate applies if your taxable income is below $48,350 (single) or $96,700 (joint). Higher incomes are subject to 15% or 20% rates.
Tax-Loss Harvesting: Sell investments with losses to offset any capital gains, reducing your overall tax liability.
6. Avoid Estimated Tax Penalties
Prepayment Requirements: To avoid penalties, prepay at least 90% of your 2025 tax or 100% of your 2024 tax (110% if your AGI exceeds $150,000).
7. Take Advantage of Gift Exclusions
Annual Gift Limit: In 2025, you can give up to $19,000 per person without using your lifetime exemption or filing a gift tax return.
Final Thoughts and Next Steps
Effective tax planning results in minimizing both federal and state income taxes. There is still time to act before the end of the year. Review your situation, consider these strategies, and consult your SD professional or tax advisor for personalized guidance.
About Schneider Downs Tax Services
Schneider Downs’ tax advisors have experience and expertise in a wide range of industries, including Automotive, Construction, Real Estate, Manufacturing, Energy & Resources, Higher Education, Not-for-profits, Transportation and others. Our industry knowledge and focus ensure the delivery of technical tax strategies that can be implemented as practical business initiatives.
To learn more, visit our dedicated Tax Services page.
