2025 year-end tax moves for individuals & families

As 2025 draws to a close, individual taxpayers face a familiar but evolving tax landscape. Many provisions from the Tax Cuts and Jobs Act (TCJA) have been preserved or extended under the One Big Beautiful Bill Act (OBBBA), while a handful of new deductions and adjustments take effect for the 2025 tax year.

This guide outlines key areas for review and planning before year-end, with attention to current law and near-term changes expected in 2026.

Review your standard deduction and age 65+ benefits

The standard deduction remains the foundation of tax planning for most Americans.

The standard deduction for 2025 is $15,750 for single filers and $31,500 for married filing jointly. These amounts are indexed for inflation and are expected to increase to $16,100 (single) and $32,200 (married) in 2026.

For taxpayers age 65 or older, there is a temporary bonus deduction of up to $6,000 per eligible individual (subject to income-based phase-outs) that applies for tax years 2025 through 2028.

Year-end move 

If you (or your spouse) turn 65 by year-end, be sure to factor in the temporary bonus deduction when estimating liability or making year-end tax payments.

If your itemized deductions are close to or below your standard deduction, consider bunching medical expenses, charitable contributions, or property tax payments into 2025. You may benefit from itemizing this year and taking the standard deduction in 2026, since it rises with inflation.

Review above-the-line deductions & new employee-focused breaks

A new deduction is available for qualified tips (for certain tipped occupations) beginning in 2025, effective through 2028: up to $25,000 in cash tips for eligible taxpayers making up to $150,000 (single) or $300,000 (married filing jointly) in modified AGI.

A new deduction is also available for qualified overtime compensation, up to $12,500 for single filers (or $25,000 for joint) for tax years 2025–2028.

These are above-the-line (reduce your AGI) benefits, so they can help preserve phase-out thresholds for other benefits or credits.

Year-end move

If you work in a tipped occupation or receive significant overtime, determine whether you qualify for these new deductions. It may help to consult with a CPA, as both deductions are nuanced. Ensure you have the necessary documentation (W-2 or 1099 reporting tips/overtime) and track your income accordingly.

Mind the state & local tax (SALT) deduction cap

Under prior law, the state and local tax (SALT) deduction cap was $10,000. The OBBBA temporarily raises the cap to $40,000 (for tax years 2025–2029). A phase-out applies once Modified Adjusted Gross Income (MAGI) exceeds approximately $500,000 (married filing jointly) in 2025, and the cap may revert to $10,000 in 2030 unless changed.

Year-end move

If your MAGI is near the phaseout range, focus on income-reduction strategies, such as maximizing retirement contributions or capital loss harvesting, to preserve your eligibility for the expanded SALT deduction. Additionally, if you own a pass-through entity, speak with your tax advisor about a PTE workaround, which may allow your business to deduct state taxes at the entity level - effectively restoring your federal deduction even if you’re over the SALT cap. 

Optimize retirement savings & withholding

Tax-deferred retirement contributions and withholding adjustments remain powerful tools for year-end. Contribute to IRAs, 401(k)s, or other employer plans before the year ends to reduce taxable income. If you expect high income in 2025 or anticipate changes for 2026, accelerating contributions may pay off.

Also, review your federal and state tax withholding/estimated tax payments. If you foresee a big jump in income (bonus, stock vesting, sale), you may need to adjust now to avoid underpayment penalties.

Year-end Move

Determine whether you’ve maximized allowable retirement contributions and run a withholding/estimated payment check. Underpayment penalties can apply if you don’t meet IRS safe harbor rules, which generally require paying at least 90% of your current-year tax liability or 100% of your prior year’s tax liability (110% for earners with AGI above $150,000). Making an additional estimated tax payment before January 15, 2026, can help reduce or eliminate any penalty exposure. 

Consider capital gains, losses, and timing of income

Capital gains and investment income should be reviewed carefully before year-end, especially if your portfolio includes appreciated assets or unrealized losses. Long-term capital gains (for assets held more than one year) are taxed at preferential rates of 0%, 15%, or 20%, depending on your income. But short-term capital gains (from assets held one year or less) are taxed at ordinary income rates. 

If you’re holding appreciated assets and anticipate higher income or tax rates in 2026, it may be worth realizing gains in 2025. Conversely, if you’re projecting a lower tax bracket next year, deferring gains until 2026 may be more advantageous. 

Losses also play a role. Tax-loss harvesting allows you to sell underperforming investments to offset realized gains, reducing your taxable income. If capital losses exceed gains, up to $3,000 can be deducted against ordinary income, with excess amounts carried forward to future years indefinitely. 

Year-end move 

Work with your CPA to review your portfolio and estimate year-end tax impact. Consider whether realizing gains now or deferring to next year aligns better with your expected tax profile, and whether harvesting losses can help offset gains or reduce income subject to the Net Investment Income Tax (NIIT). Timing matters, and a coordinated strategy can reduce both current and future liabilities.

Review estate, gift, and transfer planning

For 2025, you can gift up to $19,000 per recipient without triggering gift tax reporting or reducing your lifetime estate and gift tax exemption. A married couple can combine their exclusions and gift up to $38,000 per recipient through gift splitting. This makes annual gifting a powerful way to reduce the size of your taxable estate over time.

Year-end move 

Consider making annual exclusion gifts before December 31 to lock in this year’s limit. For example, funding 529 plans, making direct payments for medical or tuition expenses, or transferring assets to trusts for children or grandchildren can be tax-efficient ways to reduce your estate without using any of your lifetime exemption.

Even smaller gifts, such as forgiving family loans or making contributions to a child’s Roth IRA (if they have earned income), can add up over time.

Charitable contributions

For individuals who itemize, charitable contributions made this year may carry greater tax value than in future years. Beginning in 2026, the OBBBA imposes two new limitations for itemizers:

• A 0.5% AGI floor on charitable deductions (meaning only contributions above that threshold will count).
• A new 35% cap on the value of itemized deductions, which can reduce the effective benefit for some high-income donors. For taxpayers in the top (37%) marginal tax bracket, the tax benefit of itemized deductions (including charitable gifts) is effectively limited to 35% of the deductible amount, rather than the full 37%.

Year-end moves

If your total itemized deductions hover near the standard deduction threshold, you may benefit from bunching several years’ worth of charitable contributions into 2025. This allows you to itemize this year and take the standard deduction next year, instead of missing the deduction entirely in both years. 

Also, consider donating long-term appreciated assets. If held for more than a year, you may be able to deduct the asset’s fair market value while also avoiding capital gains tax. 

Taxpayers over age 70½ can transfer up to $108,000 directly from an IRA to qualified charities ($216,000 per couple if each has an IRA). These QCDs count toward required minimum distributions (RMDs) and don’t increase your AGI, which can help avoid higher Medicare premiums, preserve other deductions, and reduce taxable Social Security income. This is often a more tax-efficient option than taking an IRA distribution and then donating cash.

2025 - a year of opportunity and transition

The passage of the OBBBA has given individuals and families a clearer frame for long-term tax planning. Many of the tax provisions introduced under the TCJA remain in place, while new, time-limited deductions for tips, overtime, and state taxes offer additional planning opportunities in the near term.

As you evaluate year-end moves, consider both your 2025 liability and your broader tax profile for 2026 and beyond. Income levels, filing status, and the timing of deductions or deferrals can all influence which strategies are most effective. When needed, a tax advisor can help model scenarios or confirm eligibility for new provisions based on your specific situation. For more personalized guidance, please contact our office.