2025 Year-End Tax Planning: A Season of Stability and Strategic Timing.

As 2025 comes to a close, taxpayers find themselves navigating a tax landscape that feels markedly steadier than in previous years. The passage of the One Big Beautiful Bill Act (OBBBA) in July has reshaped expectations, locking in many provisions from the Tax Cuts and Jobs Act (TCJA) that were once set to expire. Yet, while stability replaces uncertainty, opportunity remains for taxpayers and businesses to refine their strategies before year-end.

The OBBBA permanently extended lower individual tax rates, the increased standard deduction, and the elimination of personal exemptions. With those elements now codified, year-end planning no longer revolves around speculating about legislative sunsets. Instead, focus has shifted toward optimizing timing and cash flow—particularly as inflation continues to shape real income levels and bracket thresholds.

Taxpayers may find deferring income into 2026 advantageous. The IRS’s recently published bracket adjustments for next year reflect continued inflationary growth, meaning that income postponed into 2026 may fall within lower effective tax rates. Similarly, those expecting variable income—such as commissions, bonuses, or investment gains—may wish to reconsider the timing of recognition to align with bracket thresholds.

Capital Gains and Investment Strategy. The familiar principles of capital gains management remain critical. Gains realized in 2025 are taxed at rates ranging from 0% to 20%, depending on taxable income, with an additional 3.8% Net Investment Income (NII) Tax applying to higher earners. For taxpayers on the margin between capital gains brackets, deferring the sale of appreciated assets until 2026 could mean paying a lower rate overall.

Likewise, harvesting losses before year-end remains an effective way to offset realized gains, though taxpayers must remain mindful of wash-sale rules, which prevent claiming losses on securities repurchased within 30 days. For those whose income fluctuates annually, the timing of such transactions can significantly affect total liability.

Maximizing Deductions and the Return of SALT Flexibility. While the standard deduction—now $31,500 for joint filers and $15,750 for single filers—continues to simplify filing for many, OBBBA has revived the potential of itemized deductions. The act raised the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 beginning in 2025, allowing many taxpayers—especially in high-tax states—to once again surpass the standard deduction threshold. For those close to that line, 'bunching' deductions—consolidating charitable or medical expenses into a single tax year—can still be valuable. However, this strategy may become less effective after 2025, when a 0.5% floor on charitable deductions for higher-income taxpayers takes effect. Planning charitable contributions before this change may provide greater benefit.

New Deductions Introduced Under OBBBA. The One Big Beautiful Bill Act also introduced four new deductions available