Article
Brochure
Executive Resource
Insight Hub
Video
Ext. PublicationYear-End Tax Planning for Individuals: Key 2025 OBBBA Provisions and Strategies
A mix of extensions and new deductions bring new opportunities for individual tax planning for the 2025 tax year. Numerous provisions of the One Big Beautiful Bill Act (OBBBA), effective this year or in early 2026, make year-end tax planning particularly important for 2025. As 2025 winds down, proactive planning can make a measurable difference on your 2025 income tax liability.
Highlights from the OBBBA
The following are some key provisions that will affect individual taxpayers in 2025 and beyond.
Marginal income tax rates extended and made permanent
The familiar 10%, 12%, 22%, 24%, 32%, 35% and 37% brackets for individuals were permanently extended, avoiding the 2026 rate increase previously scheduled under 2017 Tax Cuts and Jobs Act (TCJA). For the 10-12% tax rate brackets, the inflation adjustment base year was moved back from 2017 to 2016, effectively giving those tax brackets an additional year of inflation adjustment.
SALT cap temporarily raised
The tax provision that arguably received the most publicity was the SALT deduction cap. For 2025, the state and local tax deduction cap rises to $40,000 per return, increasing by 1% in 2026-2029. The cap is scheduled to revert to $10,000 for 2030.
Higher estate and gift tax exclusion and new senior exemption
Beginning in 2026, the basic estate tax and gift tax exclusion amount increases to $15 million, and it is indexed for inflation. A temporary $6,000 deduction for taxpayers age 65+ also applies from 2025 through 2028, but the deduction is phased out at higher income levels.
New deductions for tips, overtime and auto loans
Up to $25,000 in qualified tips and $25,000 of overtime pay (for joint filers) are deductible in 2025-2028, but these deductions are phased out at higher income levels. A new auto loan interest deduction of up to $10,000 per taxpayer applies to eligible U.S.-assembled vehicles purchased after 12/31/24, but this deduction is also phased out at higher income levels
Qualified business income deduction made permanent
The 20% QBI deduction for qualified business income from pass-through entities is now permanent.
Expanded qualified small business stock (QSBS) gain exclusion
Taxpayers selling qualified small business stock may now exclude up to $15 million in gain (previously $10 million), with partial benefits for three- and four-year holding periods.
Charitable giving incentives
Taxpayers that don’s itemize deductions can deduct up to $2,000 ($1,000 for single filers) in cash gifts to public charities, and the 60% AGI limit for cash donations to public charities is now permanent.
529 plans
OBBBA expands K-12 education expenses that may be covered by 529 plans to include materials, tutoring, exam fees and education therapies, and beginning in 2026, increases the annual withdrawal limit for such expenses to $20,000. Post-secondary credentialing expenses are also now considered a qualified education expense.
Opportunity zones extended
The qualified opportunity zone (QOZ) program is now permanent, with new rural zone designations and a basis step-up after five years (10% for urban zones, 30% for rural zones).
Bonus depreciation reinstated at 100%
The OBBBA restores full expensing for qualified property placed in service after January 19, 2025 — a significant benefit for business owners and investors purchasing vehicles, equipment or certain real property improvements this year.
Energy efficient home improvements
An existing tax credit of up to $3,200 for energy efficient home improvements is set to expire December 31, 2025. The improvements must be in place by December 31, 2025, to qualify for the credit.
Practical Planning Strategies for 2025
1. Accelerate charitable giving
Because new limits on itemized deductions and charitable contribution floors begin in 2026, 2025 is a prime year to front-load donations. Consider making multiple years’ worth of contributions to a donor advised fund or a private foundation in 2025.
2. Manage retirement income
A Roth IRA conversion can help manage future tax brackets and eliminate or reduce required minimum distributions. Evaluate partial conversions in lower-income years.
3. Use the increased estate tax and gift tax exemption
The estate tax and gift tax exemption rises to $15 million in 2026, but future legislation could reduce that amount. Gifting appreciating assets now may remove more value from your estate under today’s rules.
4. Leverage bonus depreciation
Taxpayers with a business can claim 100% bonus depreciation on qualifying purchases placed in service before year-end — from SUVs and airplanes used more than 50% for business to eligible property improvements.
A good tax planning idea for business owners is to buy an SUV or a jet, or perhaps even a car wash or a gas station. Because of 100% bonus depreciation, if you have a legitimate business purpose for these assets and you can use them almost exclusively for business, you can significantly reduce your income in the year that you purchase those assets.
5. Harvest capital losses strategically
Realize investment losses to offset gains, but beware of the wash-sale rule that disallows the losses if the same or substantially similar securities are repurchased within 30 days before or after the securities are sold at a loss.
6. Avoid underpayment penalties
Pay 110% of your 2024 tax liability or 90% of your 2025 tax liability via withholding or estimated tax payments to avoid the penalty for underpayment of estimated tax.
The Bottom Line
Between the extended TCJA rates, new OBBBA deductions and restored expensing rules, 2025 offers a rare mix of opportunity and complexity. Thoughtful year-end planning, particularly in the areas of charitable giving, asset purchases and income timing, can yield meaningful tax savings under the new law.
Weaver’s tax professionals can help individuals and families evaluate the impact of OBBBA provisions, coordinate charitable and estate strategies and implement tax-efficient plans tailored to their goals. For information and assistance, contact us.
©2025
Year-End Tax Planning Series
The tax landscape in 2025 has shifted with The One Big Beautiful Bill Act, introducing important changes across individual, business and state and local tax areas. Weaver’s 2025 Year-End Tax Planning blog series delivers insights and practical guidance designed to help you navigate these updates and prepare for a successful year ahead.
