As 2025 comes to a close, there’s still time to take advantage of several powerful, IRS-approved tax-saving strategies. A few well-timed actions before December 31 can reduce your 2025 tax bill, improve your cash flow, and position your finances for a stronger 2026. Here are ten practical, results-oriented steps to consider this year-end.
1. Strengthen Business Deductions Before December 31
If you operate on a cash basis, timing your expenses is one of the most effective ways to manage taxable income.
Prepay Expenses: You can prepay qualifying business expenses up to 12 months in advance and deduct them this year—items such as rent, insurance, or equipment leases. For example, if your office rent is $3,000 per month, you can prepay $36,000 on December 31 to cover 2026 rent. You’ll deduct the full $36,000 on your 2025 tax return, while your landlord reports it as income in 2026. Be sure to make the payment on December 31 and keep proof of mailing or transfer.
Delay Billing: For cash-basis taxpayers, income isn’t recognized until received. Holding invoices until January shifts taxable income into 2026. For instance, a consultant who bills $10,000 on December 28 can delay invoicing until January 2, deferring that income into the new year.
Purchase Needed Equipment: If you plan to upgrade office furniture, computers, or machinery, buy and place it in service before year-end to qualify for 100 percent bonus depreciation or Section 179 expensing. A $20,000 purchase completed on December 30 can generate a full deduction this year.
Use Business Credit Cards Wisely: Business credit card purchases are deductible on the date of charge, even if you pay the bill later. Charging $5,000 of supplies on December 29 and paying the bill in January still earns a 2025 deduction.
Claim Every Legitimate Deduction: Don’t skip valid deductions—maintain proper documentation. If deductions exceed income, the resulting loss may carry forward to offset future profits.
Review Qualified Improvement Property: Interior upgrades to your business or rental properties may qualify for full expensing if placed in service by December 31.
2. Maximize Retirement Plan Opportunities
Retirement plans remain one of the most effective ways to lower taxes and build long-term savings.
Establish or Fund a Retirement Plan: Setting up a new plan before December 31 allows both employee and employer contributions for 2025. A self-employed professional under 50 can contribute $23,500 to a solo 401(k) plus up to 25 percent of compensation, potentially reaching $70,000 or more. Those age 60–63 can contribute up to $81,250.
Use Available Tax Credits: New plans may qualify for up to $15,000 in start-up credits, up to $3,500 per employee for employer contributions, and a $500 annual automatic enrollment credit for three years. These credits reduce taxes owed directly, not just taxable income.
Consider a Roth Conversion: If 2025 income is lower or investments have declined, converting traditional retirement funds to a Roth IRA can lock in today’s lower rate and create tax-free withdrawals later. For example, converting $50,000 at a 22 percent rate may cost $11,000 in tax now but save far more in the future as your funds grow tax-free.
3. Take Advantage of Vehicle Deductions
The One Big Beautiful Bill Act (OBBBA) expanded deductions for business vehicles in 2025.
Heavy Vehicles: SUVs, pickups, and vans with a gross vehicle weight rating (GVWR) over 6,000 pounds qualify for 100 percent bonus depreciation and Section 179 expensing up to $31,300 for SUVs and up to $2.5 million for trucks and vans. A $50,000 SUV used 90 percent for business qualifies for a $45,000 deduction this year.
Standard Vehicles: Cars and lighter SUVs under 6,000 pounds face first-year caps of about $20,200. A $35,000 sedan placed in service in December could produce about a $20,000 deduction for 2025, with the remainder depreciated over the next few years. To qualify, you must own and use the vehicle for business before December 31, even if only for a single business trip.
4. Manage Crypto Profits and Losses
Crypto investors had a strong 2025, making year-end the perfect time to realize strategic gains or losses.
Harvest Gains or Losses: Sell appreciated crypto now if you expect higher income next year or sell underperforming assets to offset capital gains. Selling a $10,000 loss can offset other gains or up to $3,000 of ordinary income.
No Wash-Sale Rule: Because the IRS treats crypto as property, not securities, you can sell and immediately repurchase the same asset to recognize a deductible loss without waiting 30 days.
Charitable Giving and Gifting: Donating appreciated crypto directly to a qualified charity avoids capital gains and provides a deduction for fair market value. Donating $20,000 of crypto originally purchased for $5,000 eliminates tax on the $15,000 gain and gives a $20,000 charitable deduction. You can also give up to $19,000 per person in 2025 without filing a gift tax return.
5. Capture Deductions Hidden in Your Current Vehicles
Your current business vehicles can still generate valuable deductions.
Sell Older Vehicles: Selling older business vehicles can create deductible losses if their value has declined.
Recover Unclaimed Losses: If you traded in vehicles before 2018 under old like-kind exchange rules, you may have unclaimed losses that can now be deducted.
Convert a Personal Vehicle to Business Use: If you start using a personal vehicle for business, OBBBA allows bonus depreciation based on its fair market value. For example, converting a $30,000 personal car to 80 percent business use before December 31 results in a $24,000 deduction this year.
6. Review Your Stock Portfolio
Year-end investment planning can help reduce your tax burden.
Offset Gains with Losses: Match short-term gains (taxed up to 40.8 percent) with long-term losses to lower your taxable income.
Avoid Wash Sales: Selling and repurchasing the same stock within 30 days voids your loss deduction. Waiting until January to repurchase allows you to claim the loss for 2025.
Gift or Donate Appreciated Shares: Gifting appreciated stock to a child or parent in a lower bracket allows them to sell at 0–15 percent capital gains rates. For example, gifting $20,000 of appreciated stock to a college-age child lets them sell it tax-free. Donating appreciated shares directly to charity provides a deduction for fair market value while avoiding capital gains tax.
7. Review Health Care Reimbursement Options
For small business owners, well-structured medical reimbursement plans can offer significant tax advantages.
Section 105 HRA: If your spouse works in your business, reimburse medical expenses before year-end to claim the deduction for 2025.
QSEHRA and ICHRA Plans: Small employers can use Qualified Small Employer HRAs to reimburse up to $6,350 (individual) or $12,800 (family) tax-free. Larger employers can use Individual Coverage HRAs to reimburse employees for health insurance premiums.
S Corporation Owners: To qualify for the above-the-line deduction, your company must pay or reimburse your premiums and include them on your W-2. An S corporation paying $12,000 for an owner’s coverage can deduct the full amount when handled properly.
If you offer employee health insurance, review your eligibility for the Small Employer Health Insurance Credit, which covers up to 50 percent of premiums for two years.
8. Make Family-Focused Tax Moves
Hiring your children to work in your business is one of the simplest income-shifting strategies. Paying a child under 18 for legitimate work is deductible for you, exempt from payroll taxes, and tax-free for the child up to $15,750. That child can also contribute up to $7,000 to a Roth IRA, building lifelong tax-free savings.
Marriage and Mortgage Planning: Your marital status on December 31 determines your filing status for the year. Review both single and joint filing options to find the most beneficial outcome.
Family Gifting: Unmarried co-owners can each deduct mortgage interest on up to $1 million of older debt ($750,000 for newer loans), while married couples are capped jointly. Gifting appreciated stock to family members in lower tax brackets (with joint income under about $96,700) allows them to sell it tax-free.
9. Maximize the Section 199A Deduction
The 20 percent deduction for qualified business income remains one of the most valuable benefits for owners of pass-through entities. For 2025, the income limits are $197,300 for single filers and $394,600 for joint filers.
If your income exceeds these thresholds, you can still maximize your deduction by lowering taxable income before year-end. Strategies include harvesting capital losses, making charitable contributions, or purchasing and placing new equipment in service under Section 179 or bonus depreciation.
For instance, buying $50,000 of qualifying business equipment before December 31 may reduce taxable income enough to restore your full 20 percent deduction.
10. Year-End Tax Checklist
Before December 31, review these key steps with your tax advisor: prepay qualifying business expenses, delay billing until January, purchase and place new equipment or vehicles in service, establish or fund your retirement plan, manage your crypto and stock portfolios, complete HRA reimbursements, pay children for legitimate work, and confirm Section 199A eligibility. Each action can lower your 2025 tax liability and strengthen your financial outlook for 2026.
Final Thoughts
Year-end tax planning is about timing and strategy. Acting before December 31 allows you to capture deductions, defer income, and take advantage of new opportunities under the One Big Beautiful Bill Act (OBBBA). Discuss these strategies with Allied Tax Advisor soon to determine which steps best fit your business and personal situation.