Smart Year-End Tax Moves to Cut Your 2025 Tax Bill
With just weeks left in 2025, the right moves now can save you thousands when you file next year. But timing is everything—and the rules have changed.
Time Your Income and Expenses Strategically
Your accounting method matters. Cash-basis businesses deduct when paid; accrual businesses when incurred. But watch the 12-month rule for prepayments—paying too far ahead could backfire.
Quick wins: Push January invoices back. Prepay legitimate short-term expenses that qualify under the 12-month rule.
Lock in Equipment Write-Offs While You Can
Section 179: The 2025 limit is $1,250,000, with phase-out starting at $3,130,000. Critical detail: equipment must be placed in service—not just ordered—by December 31.
Game changer: For qualified property acquired and placed in service after January 19, 2025, bonus depreciation jumped back to 100%. A transitional election allows 40% instead for this first tax year (60% for certain long-production property). Either way, December 31 is your deadline to place equipment in service.
Maximize Retirement Contributions
The 401(k) employee deferral limit is $23,500 for 2025, with a standard catch-up of $7,500 for those 50+.
Hidden opportunity: Workers aged 60-63 get a special catch-up worth 150% of the regular amount—that’s $11,250 for 2025 if your plan offers it.
Good news: Employer contributions can be made up to your return due date, not December 31.
Capture Credits That Fit Your Business
R&D Credit: Still valuable, and expanded Form 6765 reporting is optional for 2025 (mandatory in 2026). Start tightening your documentation now.
Energy Credits: Various credits remain available for 2025. Verify current caps and eligible items before spending.
Make Charitable Giving Count
Cash gifts to public charities are generally limited to 60% of AGI. Any donation of $250 or more requires contemporaneous written acknowledgment.
Consider: Bunching multiple years of donations into 2025 or donating appreciated securities instead of cash.
Dodge Estimated Tax Penalties
The 2025 underpayment rate is 7%. Your Q4 individual estimate is due January 15, 2026. Use safe harbors—pay either your prior-year tax or 90% of current-year tax to avoid penalties.
Is Your Entity Structure Still Optimal?
Tax rates, deductions, and elections have shifted. The structure that saved you money in 2022 might be costing you now. Time to model your options for 2026.
Critical December 31 Deadlines Must happen by December 31:
- Place assets in service for Section 179/bonus depreciation
- Complete cash-basis payments
- Execute time-sensitive elections Can wait until filing deadline:
- Employer retirement plan contributions
- SEP setup and funding
The Bottom Line
Every business situation is unique. What saves one company thousands could cost another. The stakes are too high to guess.
Don’t leave money on the table. Schedule your Year-End Tax Planning Session with Excel Tax Group today. We’ll identify exactly which strategies will maximize your savings—before time runs out.
Schedule Your Session Now or call us at 949.298.2908
December 31 is coming fast. Your next move matters.