Year-End Tax Planning Considerations for 2025

Amid continued economic uncertainty, the One Big Beautiful Bill Act (OBBB) has emerged as a key factor shaping tax planning for the 2025 filing season.

The OBBB permanently extends and enhances many elements of the Tax Cuts and Jobs Act (TCJA). From a boosted deduction for small businesses to increased estate exemption, the new bill offers significant tax-saving opportunities, some of which take effect for the tax year 2025.

As a result, it’s essential for business owners to reset and reevaluate their tax planning to effectively navigate these changes and close out the calendar year strong.

It’s important to remember the end goal should not be blindly pushing income into the following year or pulling expenses into the current year. Understanding the long-term impact is key. The focus should ultimately be on the fundamental strategies of business tax planning.

While CPA Keith Klein works with his clients year-round to ensure they are ahead of the game, he uses the last few months as an opportunity to get organized and prepared for the year ahead.

“I create tax projections for my clients at the end of each year. We will set a new payroll schedule for 2026 with updated withholdings for state and federal taxes and 401(k) deferrals,” Keith says. “This helps my clients stay on a steady path for paying taxes and taking advantage of compounding interest by contributing to their 401(k) plan early. These little steps bring confidence that the year ahead is taken care of in a tax-advantaged way.”

Although we recommend that investors and small business owners strive to implement tax planning strategies throughout the year, there are often items that need to be considered prior to year-end.

Now is the time to pause and review your individual situation to ensure you’ve maximized your tax planning as we approach the last calendar quarter of the year.

Corporate Tax Planning Strategies

• Know if your state allows a Pass-Through Entity (PTE) tax deduction.
  • Most states have state income tax that allows owners of S-Corporations or Partnerships to pay their state income tax at the entity level for the portion of their income passed through on their K-1.
  • This allows you to receive a federal tax deduction for a portion of your state taxes that would otherwise not be deductible.
  • The tax payments must be made before Dec. 31, 2025, to be deducted in 2025.
  • PTE tax payments are an area of opportunity your CPA should be discussing with you. If you make under $600,000, payments should be going down. If you are nearing $600,000, additional tax planning might be necessary for higher tax savings.

• S-Corporation QBI Limits
  • The qualified business income deduction was made permanent with the passing of the OBBB.
  • The phase out limits for QBI will increase by $50,000 in 2026. Meet with your CPA to discuss whether it would benefit you to justify a change in the ratio of W-2 vs K-1 income you take from your business.

• S-Corporation Health Insurance
  • If you operate your business in an S-Corporation and pay for your health insurance through your business, you must report the premiums paid on your W-2 form.
  • While these premiums are not considered wages for employment taxes, they must be reported here to be deducted from the S-Corporation and the shareholder’s personal return.

• Consider a Defined Benefit Plan, and it’s not too late to add this plan for 2025.
  • Have you maximized your 401(k) Plan but are still looking for a way to save more in a tax-deferred environment and have excess cash flow?
  • If a cash balance plan has been on your to-do list, most advisors will generally continue to set these up if it makes long-term financial sense for the client. The original Secure Act granted extended time, allowing set-up to roll into the new calendar year as long as it’s complete before filing your 2025 return.

• Consider accelerating expenses before year-end.
  • The tax rates are not expected to change in 2026, so the fundamental concept of accelerating expenses is still sound.
    •  A common example is accelerating supply orders you would typically pay next year before year-end.
    • Another example is pre-paying for a CE course or business trip you know is on the horizon for the year ahead.
    • This may not be the right approach for someone who expects to earn significantly more income in the following year. Consult your financial advisor.

• Purchase equipment before year-end and ensure it is “placed in service” by Dec. 31, 2025.
  • If you need new equipment that will increase your ability to make more money in the future, purchase this before year-end.
    • Placed in Service is defined as when the property is ready and available for use. This includes when the equipment is held in local storage.
    • Section 179 and bonus depreciation rules allow doctors to write off substantial equipment purchases.
    • CWA advisors caution against purchasing equipment just to avoid taxes. In that case, it is more economical to just pay the taxes.
    • CWA advisors also suggest that you consider interest rates if you plan to obtain the equipment using financing.

• Research & Development Tax Credits
  • For those that qualify, the OBBB eliminated the requirement to capitalize salaries used in this calculation, which temporarily reduced the benefit for the taxpayer claiming the credit.
  • Small businesses have the ability to go back and amend returns from 2022 – 2024 with an election that reduces the reporting requirement to the IRS. But you must do this before July 4, 2026, to qualify.

• If planning leasehold improvements to qualified business property, ensure they are placed in service by Dec. 31, 2025.
  • A taxpayer can now claim bonus depreciation on 100% of the property’s cost basis.
    • Review with your CPA to ensure your purchases are “qualified business property.”
    • Not all states offer this tax benefit.

• Reimburse yourself for business expenses you personally paid by year-end.
  • If you have personally paid any business expenses this year, have the business reimburse you before year-end.
    • For 2025, the deduction for business meals remains at 50%.
    • Know what you can and cannot deduct from business-related travel.
    • Entertainment expenses generally are not deductible, although there are many exceptions.
  • Make sure your chart of accounts separates in-house meals from dining done outside the office. Starting in Jan. 2026, in-house meals will be 100% deductible.