As the calendar flips to 2026, many businesses and individuals are closing out 2025, wrapping up outstanding items and turning their attention to the strategies that will advance their goals in the new year. This year, One Big Beautiful Bill (OBBBA) adds new layers to both current-year considerations and next-year planning, encouraging a fresh look at how income, deductions and credits will be treated. Alongside the best practices that remain constant from one year to the next, this review can help you stay organized, take action before year-end and begin 2026 on a strong financial footing.
Year-End Considerations for Individuals
Individuals should review key planning steps to improve their financial position for the upcoming year. Reviewing income, deductions, and available credits can help make the most of 2025 and prepare for the changes approaching in 2026.
Accelerate Charitable Giving Before the New Deduction Floor
Beginning January 1, 2026, only charitable donations exceeding 0.5% of adjusted gross income (AGI) will qualify for an itemized deduction. Taxpayers in the 37% bracket will also see the value of all itemized deductions, including charitable contributions, capped at a 35% benefit.
These changes will likely make charitable giving more beneficial in 2025. To preserve the more favorable 2025 framework, itemizing taxpayers may consider:
- Accelerating gifts planned for 2026 or 2027
- Contributing to a donor-advised funds (DAFs)
- Consolidating multi-year giving through a “bunching” strategy
Evaluate Opportunities Created by the Expanded SALT Deduction Cap
For tax years 2025–2029, OBBBA increases the state and local tax (SALT) deduction cap from $10,000 to $40,000, indexed annually for inflation. The full cap applies to taxpayers with AGI under $500,000 and phases out for those above $600,000. Even if they haven’t itemized in previous years, taxpayers and their advisors may want to re-evaluate if itemizing could yield a better result for 2025.
To benefit in 2025, taxpayers under the phase-out threshold may consider prepaying the fourth-quarter state estimated tax if it increases their itemized deductions or reviewing whether itemizing is more beneficial than taking the standard deduction.
Revisit Capital Gains, Loss Positions and Investment Timing
Before year-end, taxpayers should review any capital gains or losses realized during the year and evaluate how they affect their overall tax position. If a portfolio includes unrealized losses, harvesting those losses may help offset gains.
Any harvesting decisions should be considered with an investment advisor, accounting for the impact on long-term allocation, as well as the wash-sale rule, which disallows deductions for substantially identical securities purchased within 30 days before or after the sale.
Maximize Retirement Contributions and Take Required Distributions
Year-end is a time to maximize retirement contributions and receive the full benefits of tax-advantaged growth
For 2025, contribution limits are:
- 401(k): $23,000
- IRA: $7,000
- Catch-up contributions (for those ages 50 or older): $7,500 for 401(k)s; $1,000 for IRAs. (Beginning in 2026, catch-up contributions must be designated as Roth contributions if your 2025 wages were $145,000 or greater; pre-tax or Roth if below.)
Individuals ages 73 or older must take required minimum distributions (RMDs) before December 31.
Roth conversions: If taxable income is lower than expected in 2025, a Roth conversion may be a worthwhile strategy to consider. This strategy transfers funds from a traditional IRA to a Roth IRA, paying tax at current rates in exchange for tax-free qualified withdrawals in the future.
Check and Use Remaining FSA Balances
Flexible spending accounts (FSAs) often follow a “use-it-or-lose-it” rule, meaning unused balances expire on December 31 unless an employer offers a carryover or grace period. Taxpayers should review their balances now to avoid losing any unused funds.
Update Estate, Gift and Trust Planning for 2026
OBBBA replaced the expectation that the federal gift, estate and generation-skipping transfer exemption would drop to pre-2018 levels at the end of the year. Instead, the exemption increases to $15 million per person ($30 million for married couples) in 2026, expanding the amount that can be transferred without incurring federal estate tax. The final months of the year are also an ideal time to revisit wills, trusts and beneficiary designations to ensure they reflect the current wishes.
Annual Exclusion Gifts: Taxpayers can use annual exclusion gifts to reduce their taxable estate over time. For 2025, individuals may give up to $19,000 per recipient, or $38,000 for married couples who elect gift-splitting, without using any of their lifetime exemption.
Explore More Credits and Deductions Available in 2025
Several new credits and deductions apply beginning in tax year 2025, while others have been expanded. While reviewing 2025 expenses, taxpayers should track amounts that may qualify so these benefits can be applied at filing time.
The following credits and deductions may be available to taxpayers in 2025:
- Tips and Overtime: Workers may deduct certain tip and overtime beginning January 1, 2025. For tipped workers, up to $25,000 is deductible, phasing out at $150,000 AGI. Taxpayers who receive overtime compensation may deduct the portion that exceeds their regular hourly rate, up to $12,500.
- Child Tax Credit (CTC): Eligible taxpayers with income under $200,000 (or $400,000 for joint filers) may claim a $2,200 credit per child under age 17. Depending on earned income, an additional $1,700 refundable credit may also apply.
- Senior Tax Credit: Taxpayers ages 65 or older may deduct $6,000 (or $12,000 for joint filers), with phaseouts beginning at $75,000 AGI ($150,000 for joint filers).
- Vehicle Loan Interest Deduction: Individuals may deduct interest paid on qualifying personal-use vehicle loans, up to $10,000 per year. Phaseouts begin at $100,000 AGI ($200,000 for joint filers).
Year-End Considerations for Businesses
For businesses, the final weeks of the year present an opportunity to align spending strategies with 2026 priorities, especially as new federal incentives, state conformity rules and shifting multistate requirements will influence how investments and income are treated.
Integrate Bonus Depreciation and Section 179 into Capital Planning
OBBBA restores 100% bonus depreciation for qualifying property placed in service after January 19, 2025, including eligible machinery, equipment, and improvements made throughout the year.
Section 179 expensing has also been increased to $2.5 million with a $4 million phase-out threshold. Businesses planning late-year purchases should confirm delivery and placement-in-service dates and review 2026 project timelines to determine how these incentives fit into broader capital planning.
Evaluate Qualified Opportunity Zone and Qualified Production Property Opportunities
OBBBA preserves the Qualified Opportunity Zone (QOZ) program, allowing taxpayers to defer 2025 capital gains by reinvesting within the standard 180-day window. Before year-end, businesses should confirm when 2025 gains occurred and whether that window is still open.
OBBBA also creates a 100% deduction for Qualified Production Property (QPP), a new category of nonresidential real property primarily used for manufacturing.
To qualify for QPP, projects must:
- Begin construction after January 19, 2025
- Be placed in service before January 1, 2031
- Meet eligibility criteria as being primarily used for manufacturing or production
Reviewing any planned upgrades or facility work can help determine whether QOZ deferral or QPP expensing can be applied to 2025 and accounted for in next year’s plans.
Confirm PTET Elections and Required 2025 Payments
Many states require PTET (Pass-Through Entity Tax) elections or payments before December 31 to apply to the 2025 tax year. Before year-end, businesses should confirm whether the 2025 election has been made, what estimated PTET payments are due and any multi-state differences in timing.
Because OBBBA preserves the federal deductibility of PTET, it may also be appropriate to revisit entity structure. The interaction between PTET, basis, QBI eligibility, and income allocation can influence which structure (S corporation, C corporation, partnership, or another pass-through entity) would most benefit the business.
Review QBI Eligibility and Year-End Compensation Decisions
Pass-through owners should reassess how 2025 income and compensation decisions affect eligibility for the 20% Qualified Business Income deduction under OBBBA. Businesses, especially Specified Service Trade or Businesses (SSTBs), may want to evaluate whether owner compensation, year-end bonuses or projected taxable income strengthen the QBI calculation or move the company into or out of the phaseout ranges.
Revisit Business Retirement Plan Funding
Employer retirement plans may have year-end or filing-date funding deadlines. A thorough review of contribution levels, plan design and participation rates can help employers strengthen benefits and manage taxable income entering 2026.
For covered businesses in New York who do not offer a retirement plan, rolling deadlines for the required New York State Secure Choice Savings Program will begin in 2025. Businesses may want to evaluate with an advisor if a private retirement plan may be more beneficial, especially with credits offered to employers through SECURE 2.0.
Explore More Federal Credits and Incentives for Businesses and Employers
Several business credits and incentives apply in 2025, with many requiring eligible spending to occur before year-end. While reviewing 2025 expenses, businesses should track amounts that may qualify so these benefits can be applied at filing time.
The following credits and deductions may be available to businesses in 2025:
- Work Opportunity Tax Credit (WOTC): Employers hiring individuals from IRS-defined targeted groups may receive a credit of up to $2,400 per eligible hire (40% of up to $6,000 of wages).
- Employer-provided Childcare Credit: Businesses providing childcare services to employees may be eligible for a credit of up to $150,000 per year (25% of qualified facility expenditures plus 10% of qualified childcare resources and referrals.
- Clean Energy Credits: Several clean energy incentives begin phasing down in 2026. Businesses planning energy-efficient upgrades, vehicle purchases, or charging infrastructure should evaluate if those investments should be accelerated.
- Employee Meal Deductions: Most business and employer-provided meals remain 50% deductible in 2025. (While OBBBA currently disallows 100% of these expenses, a technical correction under consideration may restore the 50% deduction.)
General Best Practices for Year-End
Even with many new provisions to navigate for 2025, the core year-end best practices remain the same. A focused review of key items now can help businesses stay organized and prepared for filing season:
- Review multistate exposure and nexus, especially if employees worked remotely or if the business added new jurisdictions during 2025.
- Revisit agreements, including employment, vendor, lease and financing documents, for tax, withholding and state-filing implications.
- Assess audit-readiness, including documentation for major 2025 transactions, capital purchases, R&D activity and compensation decisions.
- Update internal checklists for 2026 deadlines, reporting requirements and new state-specific rules introduced under OBBBA.
Addressing these essentials now will help businesses stay ahead of approaching filing deadlines and be better prepared for the year to come.
Start 2026 Strong with Grassi
The end of the year is a valuable moment to take stock of financial activity and consider how upcoming tax changes may influence 2026. Clarifying what must be addressed before year-end can help ensure a more organized transition into the new year.
Grassi’s Tax advisors are available to help you review your options, understand how these changes apply to your situation and outline the strategies that best support your goals for 2026.
