The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and had several provisions that take effect in 2025 and future years. To assist you with making decisions on what works best for you and your individual taxes, we have compiled a list of tax strategies based on new and current tax rules in effect that may help you save tax dollars if you act before the end of the year.
Your team at Sciarabba Walker is continuously evaluating tax policy and will inform our clients of any changes. Please stay tuned to our website and follow us on social media for the most up-to-date tips and guidance as they become available.
We would be happy to assist you with your year-end tax planning or answer any questions. Please reach out to your personal Sciarabba Walker contact or email us at info@swcllp.com at your earliest convenience.
Adjusted Gross Income
Because many tax benefits are tied to or limited by your Adjusted Gross Income (AGI), an essential aspect of tax planning is estimating both your 2025 and 2026 AGI. Your 2024 tax return, 2025 pay data, and other income- and deduction-related documents are good starting points. After you’ve estimated AGI, consider whether to accelerate or defer income or deductions.
- Deferring income is advantageous so long as doing so does not push you into a higher tax bracket in the following year(s).
- Accelerating income into 2025 may be beneficial if you anticipate being in a higher tax bracket in 2026.
New Temporary Deductions
For 2025–2028, you may be eligible for new deductions:
- up to $25,000 of qualified tips,
- up to $12,500 of overtime premium pay ($25,000 for joint filers),
- up to $10,000 of interest on loans for new, U.S.-assembled vehicles, and
- an additional senior deduction of up to $6,000 if you are age 65 or older.
These deductions are available whether you itemize or claim the standard deduction. Each deduction is subject to income phaseouts and specific eligibility rules.
Standard Deduction vs. Itemized Deduction
The standard deduction for 2025 is:
- $31,500 – Married filing jointly
- $23,625 – Head of household
- $15,750 – Single or married filing separately
If you itemize, medical expenses must exceed 7.5% of AGI, and the state and local tax cap increases to $40,000. Itemizing is only beneficial if your total deductions exceed the standard deduction.
Bunching strategy: grouping discretionary expenses such as property taxes, medical costs, and charitable giving into a single year. This may allow you to exceed the itemized deduction threshold. Consider paying deductible expenses with a credit card before year-end; the deduction is allowed in 2025 even if you pay the credit card bill in 2026.
Investments
Consider selling underperforming assets before year-end to offset realized capital gains. Avoid buying mutual funds that are expected to make large year-end capital gain distributions, as you may be taxed on the full distribution despite holding the fund for a short period. If you hold appreciated long-term assets, consider harvesting gains that qualify for the 0% long-term capital gains rate, available if your taxable income is below:
- $96,700 – Married filing jointly
- $64,750 – Head of household
- $48,350 – Single or married filing separately
Retirement Savings
You still have time to increase retirement contributions in 2025 to help reduce AGI.
- 401(k) employee elective deferral limit: $23,500
- Catch-up (age 50+): $7,500
- Special catch-up (ages 60–63): $11,250
- IRA contribution limit: $7,000
- IRA catch-up (age 50+): $1,000
Taxpayers with income of $145,000 or more must make catch-up contributions to a Roth IRA or Roth 401(k).
Self-employed individuals may contribute to a SEP IRA up to the lesser of 25% of compensation or $70,000.
If you believe a Roth IRA is more beneficial than a traditional IRA, consider converting traditional IRA funds in 2025 if eligible. Keep in mind that the conversion increases taxable income, potentially affecting other deductions or credits—but may be worthwhile if you expect higher future tax rates.
Green Energy Tax Credits
Several energy-related credits from the Inflation Reduction Act are expiring:
- Clean Vehicle Credit for new and used electric or hybrid vehicles expired on September 30, 2025.
- Residential clean energy credits (e.g., for boilers, water heaters, etc.) expire on December 31, 2025.
Restrictions apply. Please consult with us regarding which credits may still be available to you.
Gifting and Charitable Giving
The annual gift exclusion for 2025 and 2026 is $19,000 per recipient.
Contributions to 529 plans remain a flexible, tax-advantaged way to fund education.
Taxpayers age 70½ or older may make Qualified Charitable Distributions (QCDs) of up to $108,000 in 2025, which can satisfy required minimum distributions.
The federal estate and gift exemption increases to $15 million per person ($30 million per couple) for transfers after December 31, 2025.
After December 31, 2025, charitable deductions will be subject to a 0.5% AGI floor. Maintain proper documentation for all charitable gifts.
A Donor-Advised Fund (DAF) may be a useful tool for securing an immediate tax deduction while distributing funds to charities over time.
Child and Adoption Tax Credits
The Child Tax Credit increases to $2,200 per child for 2025 and beyond, with $1,700 refundable.
The $500 credit for other dependents becomes permanent.
The Adoption and Dependent Care Credit is increased and partially refundable, with an adoption credit limit of $17,280 per child, up to $5,000 refundable.
Additional Tax and Financial Planning Considerations
Please discuss the following items with us, as they may affect your tax situation:
- Life changes – marriages, divorces, births, deaths, job changes, business ventures, or major purchases (e.g., real estate, tuition).
- Financial records – review insurance policies and beneficiary designations.
- Estimated tax payments – with underpayment interest currently at 7%, review 2025 withholding and estimated tax payments.
Digital Assets and Virtual Currency
Digital assets include NFTs, cryptocurrencies, and stablecoins. Beginning with 2025 transactions, the IRS will implement new reporting rules. For certain transactions through a broker or digital asset platform, you may receive a Form 1099-DA in early 2026.
You are responsible for accurately reporting all taxable digital asset transactions, even if you do not receive a 1099-DA. Maintain detailed records of all purchases, sales, exchanges, and related activity, as IRS scrutiny in this area continues to increase.
Electronic Payments To and From the IRS
In March 2025, President Trump signed an executive order requiring all federal disbursements, including IRS refunds, to be made electronically beginning September 30, 2025. According to the IRS, payments to the Treasury may continue under current methods until further guidance is issued. We recommend reviewing your refund and payment methods to ensure compliance and avoid delays.