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.

Review your standard deduction and age 65+ benefits

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

2025 Standard Deduction Amounts based on Filing Status

Note:  For the 2025 tax year, a single filer over 65 can claim an additional standard deduction of $2000, while a married couple filing jointly receives an additional $1600 per qualifying spouse.

Senior Bonus Deduction

The “$6,000 senior bonus deduction” is a new, temporary federal tax benefit available to eligible U.S. taxpayers aged 65 or older, starting with the 2025 tax year (taxes filed in early 2026). It is a separate, additional amount added to the standard deduction for seniors.

Key Details

• Amount: The maximum deduction is $6,000 for single filers and up to $12,000 for married couples filing jointly if both spouses are 65 or older.
• Eligibility: You must be 65 or older by December 31 of the tax year for which you are filing (e.g., December 31, 2025, for the 2025 tax return). You must also have a Social Security number.
• Availability: This deduction is available even if you itemize your deductions, which is different from the existing age-based standard deduction.
• Duration: The provision is temporary and is set to expire after the 2028 tax year unless Congress extends it.

• Income Limits (Phase-Outs)
  • • The deduction is gradually reduced (phased out) if your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds:

• • Single Filers: The deduction begins to phase out if MAGI is over $75,000 and is fully eliminated for MAGI above $175,000.
  • Married Filing Jointly: The deduction begins to phase out if MAGI is over $150,000 and is fully eliminated for MAGI above $250,000.

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.

Tip Income Deduction and Overtime Deduction

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. This applies to overtime compensation paid to an individual as required by the Fair Labor Standards Act that is above the regular rate at which that individual is employed. However, the deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). These are above-the-line (reduce your AGI) benefits, so they can help preserve phase-out thresholds for other benefits or credits.

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 are 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), 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 have maximized allowable retirement contributions and run a withholding/estimated payment check. Underpayment penalties can apply if you do not 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.

Vehicle Interest Deduction

You can deduct up to $10,000 of interest on loans to purchase qualifying personal use vehicles. This applies to new passenger vehicles with gross-weight vehicle ratings under 14,000 pounds. Final assembly must occur in the United States. However, the deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).

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 are holding appreciated assets and anticipate higher income or tax rates in 2026, it may be worth realizing gains in 2025. Conversely, if you are 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:

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 gifts 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 overtime.

Charitable contributions

For individuals who itemize, charitable contributions made in 2025 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 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%.

Starting in 2026, taxpayers who do not itemize their deductions can claim a permanent above-the-line deduction for qualified cash donations up to $1000 for single filers and $2000 for married couples filing jointly.

• Eligibility: This deduction is available only to taxpayers who take the standard deduction on their federal income tax return.
• Deduction Amount: The maximum deduction is $1,000 for individuals (including those married filing separately) and $2,000 for married couples filing jointly.
• Donation Type: It applies only to direct cash contributions made to qualified public charities. “Cash” includes donations made by cash, check, or credit card.
• Ineligible Donations: Contributions to donor-advised funds (DAFs) or private non-operating foundations do not qualify for this specific deduction.
• AGI Impact: This deduction is taken “above the line,” meaning it reduces your adjusted gross income (AGI).

Year-end move:

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 do not 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.

Cryptocurrency

New digital asset reporting requirements are scheduled to go into effect for returns filed after December 31, 2025.

• New Form 1099-DA: Starting with the tax year 2025 (forms issued in early 2026), digital asset brokers and exchanges must report sales and exchange transactions to the IRS and taxpayers on the new Form 1099-DA.
  • For the 2025 tax year, exchanges are only required to report the gross proceeds of sales.
  • For the 2026 tax year and onward, exchanges will also be required to report the basis of assets purchased and sold on the same platform, which will make it easier for taxpayers and the IRS to calculate gains or losses.

Retirement Planning

Limits to your annual contribution are as follows:

For those employees without retirement benefits and those that are self-employed – the limits are as follows:

Note that the deduction for traditional IRA contributions is phased out if your modified adjusted gross income exceeds certain levels and you or your spouse participates in an employer sponsored retirement plan.

Required Minimum Distributions (RMD)

Required minimum distributions (RMD) are the minimum amounts you must withdraw from your retirement accounts each year. The required minimum distribution (RMD) age depends on your birth year: it is 73 for those born between 1951 and 1959 and 75 for those born in 1960 or later.

You must start taking RMDs from traditional retirement accounts like IRAs and 401(k)s in the year you reach the applicable age.

RMD age by birth year

If you reach age 73 in 2025:

• Your first RMD is due by April 1, 2026, based on your account balance on December 31, 2024, and
• Your second RMD is due by December 31, 2026, based on your account balance on December 31, 2025.

Inherited IRA’s

If you inherit an IRA, the rules for distributions depend on the account owner’s date of death (before or after 2020), the beneficiary’s relationship to the owner and the original owner’s age and status when they passed away.

If the account owner died after 2019, the 10-year rule generally applies for non-spouse beneficiaries, meaning the account must be fully distributed within 10 years following the year of death.  For 2025, most non spouse beneficiaries must begin taking annual required minimum distributions (RMD) from an inherited IRA and empty the account within 10 years.

If the account owner died before 2020, rules based on the original owner’s remaining life expectancy may apply.

Note that inherited ROTH IRAs have no required minimum distributions.

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.

If you have any questions about individual year-end tax planning, our team is here to help. Please contact your trusted TBC advisor for the latest updates and guidance.

The 2022 Tax year is swiftly coming to an end. Taxpayers should be on the lookout for three provisions effective January 1, 2023 which could have a significant impact on entity returns for the manufacturing industry; (1) the Tax Cuts and Jobs Act (TCJA) of 2018’s amendment to §174, (2) the Internal Revenue Code (IRC) §163(j) business interest expense deduction limitation modifications, and (3) a start to the phase out of bonus depreciation.

The TCJA amendment to §174 will have a direct impact on research and development (R&D) expenditures incurred during the 2022 tax year. Companies incur R&D costs to innovate and design new products and services or improve the efficiency of existing systems. According to the § 174 amendment, R&D costs must be capitalized and amortized over a five-year period for domestic expenditures, and amortized over a 15-year period for foreign-related costs. Prior to this provision, companies were allowed the option to expense these costs during the year they were incurred. Companies may want to consider claiming the R&D tax credit to offset any increased tax liability due to the amendment if they have not already done so in the past.

The IRC § 163(j) interest deduction limitation has been in place since the 2018 tax year, but the calculation is changing in 2023.  It is important to note that the provision does not generally impact small businesses with average annual gross receipts of $26 million or less for the 3 previous tax years. For larger entities, this provision eliminates the add-back of depreciation and amortization expenses to calculate Adjusted Taxable Income (ATI). Prior to the limitation, companies could leverage a higher ATI to maximize their deduction. Since business interest expense is deductible by up to 30% of ATI, companies that utilize loans to cover the costs of operations may notice an increase in their entity’s tax burden. Many manufacturing companies rely on business loans and leases to fund the purchase of equipment, maintain operations and facilitate growth.

Lastly, the phase-out of bonus depreciation comes into effect beginning in the 2023 tax year, and it may impact your business’s purchasing decisions regarding capital assets. Bonus depreciation allows companies to immediately deduct an asset’s purchase price rather than writing the expense off over the asset’s useful life. Before the 2022 tax year comes to an end, businesses are allowed to take 100% of the asset’s depreciation deduction during the year it is placed in service. This benefit will decrease by 20% every year until the provision sunsets in 2027.  Bonus depreciation is limited to qualified property and may require an addback on your state returns if that state decouples from the federal provision (including New York). Qualified property generally includes any property with a recovery period of 20 years or less. Companies in the manufacturing industry may want to take advantage of this opportunity to offset the high costs of equipment purchases while it is still in effect.

If you would like to better understand the impact these changes may have on you or your business, please contact your TBC Advisor to navigate the best options for you.

By: Patricia Johnson, Accountant

With tax year 2021 coming to a close, we need to consider what can be done to help lower your tax bill for this year and next. With the uncertainty of pending legislation, here are some tax planning ideas for Businesses.

Review your accounting method

Businesses typically use either an accrual method of accounting or the cash basis. Under an accrual method, income and expense is recognized when: 1) All events have occurred to deduct the cost or recognize the income and 2) the amount can be determined with reasonable accuracy.  Under the cash basis, income is recognized when actually or constructively received and expenses are generally deducted in the year paid. Many businesses were prohibited from using the cash basis of accounting due to restrictions on gross income levels or the required use of inventories. The Tax Cuts and Jobs Act of 2017 (TCJA) has expanded the definition of who qualifies to use the cash basis of accounting. Businesses with average annual gross receipts (3-year average) under $26 million can now qualify to use the cash method of accounting. Is the cash method right for your business?

Cost Segregation Analysis

A Cost Segregation Analysis is a commonly used strategic tax planning tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to accelerate depreciation deductions. When a property is purchased, not only does it include a building structure, but it also includes all of its interior and exterior components. Many of those components fall into tax categories that can be written off much quicker than the building structure. A Cost Segregation Analysis dissects the construction cost or purchase price of the property that would otherwise be depreciated over 27 ½ or 39 years. The primary goal of a Cost Segregation Analysis is to identify all property-related costs that can be depreciated over 5, 7 and 15 years.

Qualified Improvement Property

Qualified improvement property (QIP) is an improvement made to the interior of an existing nonresidential building (enlargements, elevators/escalators, or internal structural framework do not qualify). The Coronavirus Aid, Relief and Economic Security Act (CARES Act) shortened the depreciable life of QIP from 39 years to 15 years. This change is retroactive to property placed in service in 2018. QIP is also eligible for immediate deduction by electing to take 100% bonus depreciation or a section 179 deduction in the year the property is placed in service.  However, New York (and many other states) have decoupled from the CARES Act, and the depreciable life for QIP in New York remains at 39 years.

Bonus Depreciation

Bonus depreciation allows for the accelerated depreciation of capitalized assets with depreciable lives of 20 years or less. The allowable bonus depreciation is typically 100% of the cost of the property, with the exception of certain passenger automobiles that are subject to dollar limits on a per vehicle basis. Placing bonus-eligible assets in service before year end can be an effective way to reduce your Federal tax liability. Caution: New York, and many other states, don’t accept bonus depreciation. Bonus depreciation claimed on the Federal return must be added back in full to NY taxable income, and the bonus eligible property is depreciated over the normal recovery period.

Expensing Business Property (Section 179)

For 2021, the expensing limit is $1,050,000 and is generally available for most depreciable property (other than buildings) and off the shelf computer software.

Research Credit

The Research and Development (R&D) Tax Credit remains one of the best opportunities for businesses to substantially reduce their tax liability. Large and small companies from a wide-range of industries can qualify for federal and state tax savings. The R&D Tax Credit may be claimed by taxpaying businesses that develop, design or improve products, processes, formulas or software. Research activities no longer have to be new to the industry; instead activities need to be new to the company – a standard that is much more favorable to taxpayers.

Planning with Year-End Bonuses

If a business is having a successful year consider making bonuses to employees. An accrual basis taxpayer can accrue bonuses, and get a deduction in 2021 as long as they make the payments by March 15, 2022. Please note that bonuses accrued to owners do not qualify.

If an owner believes they are underpaid for estimated taxes, a year-end bonus paid by December 31, 2021 can be used to withhold additional federal and state taxes.

Another bonus strategy relates to an existing C corporation that is making an election to be treated as an S corporation. An existing C corporation that makes this election is subject to built-in-gains (BIG) tax for a 60-month period after electing S status. Any asset sold during the 60-month period that has a BIG attached is subject to C corporation tax rates. An accrued bonus to an owner that is paid in the following year is considered a built-in-loss that can be used to reduce BIG tax in the future.

Other Miscellaneous items

Consider moving income into 2021 from 2022 if you anticipate a small net operating loss this year. By creating a small amount of net income, a C corporation can base their 2022 estimated tax payments on the 2021 safe-harbor tax rather than calculating estimates on a quarterly basis.

If you have a passive activity with suspended losses, consider disposing of the activity to free up those losses.

Pending legislation may adjust the state and local tax (SALT) limit for individuals. Keep in mind that New York State recently created a workaround – the Pass Through Entity Tax (PTET) credit. Please see “NY PTET Tax – Update” posted on August 27, 2021 to the TBC Web page.

These are just a few planning ideas to consider for 2021 or 2022 and are general in nature. If you have any questions or need further information please contact your TBC advisor.

While the Tax Cuts and Jobs Act (“TCJA”) is nearly four years old, some of the key provisions of the legislation have not yet taken effect.  Among these provisions are the changes to Section 174 of the tax code, which covers the deductibility of research and development expenditures.  Companies that operate within the manufacturing industry should begin to familiarize themselves with the changes that will be enacted when this provision takes effect for tax years beginning after December 31, 2021, specifically, the limitation around the immediate expensing of research and development (R&D) costs.

Prior to the TCJA, companies had the option of expensing R&D costs immediately or deferring and amortizing these expenditures over a minimum five year period beginning in the month that the company first realized an economic benefit from the expenditures.  Once the changes to Section 174 take effect, companies who have R&D expenditures will not be allowed to deduct these expenses in the tax year they are incurred.  Instead, companies will be required to charge these expenditures to a capital account and amortize them over a five-year period beginning at the midpoint of the year in which the R&D expenditures were paid or incurred.  For companies with foreign related R&D expenditures, the provisions are even more restrictive, requiring companies to amortize foreign R&D expenditures over a fifteen-year period.  The restrictions around the immediate deductions of these expenses could have a significant impact on companies who operate in industries that see heavy expenditures on R&D, such as manufacturing.

Manufacturers need to understand the limitations imposed by the TCJA, and will need to work with their CPA’s well in advance of the end of the 2022 tax year to plan for the impact it will have on taxable income.  Further, companies should be aware that these changes will impact other areas within their tax and reporting functions.  The changes will result in additional timing differences between GAAP and tax reporting and will impact the amount of R&D tax credits the Company is entitled to. While Congress has introduced legislation in early 2021 which would eliminate the changes to section 174, companies should not rely on this legislation getting passed given the current political environment.  If you would like to better understand the changes to Section 174 and how it will impact your organization, contact your TBC Advisor.

By: Gary Domermuth, CPA, Manager

A controversial provision of the Tax Cuts and Jobs Act (TCJA) limited the itemized deductions related to state taxes (real property taxes plus state & local income taxes). Since its enactment, individual taxpayers have been limited to a maximum deduction of $10,000 on their federal income tax return.

A number of states responded by enacting a pass through entity (PTE) tax on S corporations and partnerships (including multi-member LLCs) to help benefit the direct owners impacted by the tax limitation. Since most states do not tax the income from a PTE (it flows out to the owners), the thought was this tax would decrease the flow through income reported on the owner’s federal income tax return. In addition, this tax would be reported as a credit on the owner’s state income tax return to offset personal state income taxes.

One of the uncertainties of having a state tax on the flow through income of a PTE was – would the IRS accept this as a deduction against the PTE income. In November 2020, the IRS issued Notice 2020-75 allowing PTEs a deduction for the state taxes imposed on their income for federal tax purposes; the Notice states that this deduction would not be limited to the $10,000 cap imposed by the TCJA.

Based upon this favorable position, New York State has created their own PTE tax effective for tax years beginning on or after January 1, 2021. Partnerships (other than publicly traded partnerships), LLCs treated as partnerships (or LLCs who have made an election to be an S corporation for federal and New York State purposes) and New York State S corporations can now elect to pay the PTE tax.

How does the New York State PTE work?

To file and pay PTE tax, the eligible partnership or S corporation must make an irrevocable annual election by the first estimated payment due date, which is March 15 of the calendar year prior to the year in which the PTE tax return is required. The election is made annually and will be effective for the current taxable year. For the 2021 tax year only, an election must be made by October 15, 2021. A fiscal year filer is required to make the election by October 15, 2021, if the fiscal year filer’s final date of the entity’s taxable year falls before the December 31, 2021, calendar year-end. The PTE tax return will be due March 15 of the following year (the 2021 return is due March 15, 2022); fiscal year taxpayers will file by March 15 following the close of the calendar year that contains the final day of the entity’s tax return.

Electing entities are required to make four equal estimated tax payments for every quarter of a calendar year. For the 2021 tax year only, no estimated taxes will be required to be made. Beginning with March 15, 2022, estimated tax payments are to be made by March 15, June 15, September 15 and December 15, regardless of whether the entity has a calendar or fiscal year-end.

A partnership’s NYS taxable income is the sum of the entity’s adjusted net income (all items of income gain, loss, or deduction) allocated to NYS to the extent included in a nonresident partner’s taxable income and adjusted net income to the extent included in a resident partner’s taxable income.  Similarly, an S corporation’s NYS taxable income includes “all items of income, gain, loss, or deduction derived from or connected with New York sources to the extent they would be included in the taxable income of a shareholder subject to tax under Article 22.”

The tax is imposed at a graduated rate from % on the first $2 million of a PTE’s taxable income up to a maximum of 10.9% on taxable income in excess of $25 million.

The tax is imposed on the entity; however, each partner or shareholder would have joint and several liability for their share of the PTE tax. As such, the owners would be liable for the tax if the entity fails to make the payment.

A NYS tax credit is available for a direct partner or shareholder of an electing PTE; the credit is based on their distributive share of the PTE taxes paid by the entity. Both resident and non-resident owners may be entitled to this credit. If an individual is a partner/shareholder in multiple electing entities, his or her total credit is equal to the sum of such credits calculated separately for each entity. If the credit exceeds tax due for the taxable year, it should be treated as an overpayment, which can be credited or refunded, without interest.

Note: Any individual that is claiming a tax credit for PTE taxes paid must have a corresponding NY addback of the amount of the PTE tax deduction (while the PTE tax is deductible in computing a PTE owner’s federal taxable income, it is not allowed as a deduction in computing such owner’s NYS taxable income).

The New York legislation provides that a resident credit will be allowed for any PTE tax paid that is “substantially similar” to NYS’s PTE tax.

Please note that this is a high level summary of the PTE tax. We are currently awaiting official guidance and forms from NYS regarding the PTE tax. As more information becomes available we will update our website.

By: Steve Cardinal, CPA, Tax Partner