2025 Year End Tax Check List to Maximize Deductions

With the end of the 2025 tax year approaching on December 31, reviewing and acting on available deductions can significantly reduce your taxable income. This expanded guide covers an extensive list of deductions for individuals and businesses, based on current IRS rules and recent updates like the One Big Beautiful Bill Act (OBBBA). Supplemental information regarding 2025 tax deductions can be found at my recent: 2025 Tax Deduction Video.

• Opt for the standard deduction if it exceeds your itemized total: Estimated at $15,750 for singles and $31,500 for married filing jointly (up from 2024’s $14,600/$29,200), with additional amounts for those 65+ or blind ($1,950 for unmarried singles, $1,550 otherwise).

• If itemizing, bunch expenses like medical (over 7.5% of AGI), mortgage interest, and state/local taxes (SALT cap increased to $40,000, or $20,000 for married filing separately, phasing out above $500,000 income).

• Additional itemized: Alimony (pre-2019 agreements), educator expenses (up to $300), student loan interest (up to $2,500), bad debts, canceled debt on home, capital losses, gains from sale of your home, gambling losses, and home mortgage interest.

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• Temporary deductions: Senior deduction for those 65+, auto loan interest, overtime income, and tip income.

• Tip: Bunch deductible payments like property taxes or charitable gifts to exceed the standard threshold.

2. Retirement Contributions (Individuals and Businesses)

• Traditional IRA: Up to $7,000 ($8,000 if 50+), deductible if income-eligible; contribute by April 15, 2026, but maximize by year-end for immediate benefits.

• 401(k) or similar: $23,500 base, plus $7,500 catch-up (50+), or enhanced $11,250 for ages 60-63 (total up to $34,750); “super” catch-up for 60-63.

• Health Savings Account (HSA): $4,150 individual/$8,300 family, plus $1,000 catch-up (55+); triple tax-advantaged.

• For businesses/self-employed: Deduct SEP-IRA or Solo 401(k) contributions (up to $70,000 for Traditional SEP or Solo 401(k)); startup plan costs up to $5,000 credit; defined benefit or cash balance pension plans up to $100,000–$300,000; Roth IRA, Traditional IRA, or Keogh plans.

3. Charitable Contributions (Individuals and Businesses)

• Cash donations: Deduct up to 60% of AGI for itemizers; non-itemizers get an above-the-line deduction up to $1,000 single/$2,000 joint (starting 2025 under OBBBA).

• Appreciated assets (e.g., stock held >1 year): Deduct fair market value up to 30% AGI, avoiding capital gains tax; donating appreciated stock is especially efficient.

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• Qualified Charitable Distributions (QCDs) from IRAs: Up to $108,000 if 70½+; counts toward RMDs without taxing income.

• Businesses: Deduct donations on returns; cap at 10% of taxable income for C-corps; sponsorships or event contributions if C Corp.

• Tip: Bunch donations or use donor-advised funds to exceed thresholds; strategic spending via charitable giving.

4. Business and Self-Employment Deductions

• Home office: Simplified $5/sq ft (up to $1,500) or actual expenses (e.g., utilities, rent portion, repairs, maintenance).

• Supplies and equipment: Deduct office supplies, software subscriptions, furniture, computers, technology, and Section 179 expensing up to $1,220,000 for qualifying assets (e.g., machinery, vehicles, equipment); depreciation for assets like real estate or furniture.

• Travel and meals: 70 cents/mile for business use of car; 50% for meals (100% for business travel meals); overnight travel costs like airfare, hotels, taxis.

• Insurance and fees: 100% of business insurance premiums (liability, property, workers’ comp), health insurance premiums (100% for self-employed), bank fees, merchant processing fees, and professional services (legal, accounting, tax prep).

• Employee-related: Salaries, benefits (e.g., health insurance, education assistance, dependent care, life insurance, adoption assistance, retirement plans), gifts ($25/employee), contractor payments (issue 1099-NEC over $600), hiring children for legitimate work.

• Qualified Business Income (QBI): Up to 20% deduction for pass-through entities (expiring end of 2025, so maximize now).

• Other: Startup/organizational costs ($5,000 immediate each), cost of goods sold (raw materials, labor, packaging), utilities (gas, electricity, internet, phone), advertising/marketing (up to $5,000 startup), interest on loans/credit cards, bad debts/losses, taxes (state/local, employment, excise), education/continuing education, cell phone (business portion), rent/lease (office, warehouse, or personal residence under Augusta Rule max 14 days), repairs/maintenance, self-employment tax (15.3%), everything else ordinary/necessary (Section 162), relocation expenses (if qualifying).

5. Other Key Deductions and Strategies

• Medical expenses: Over 7.5% AGI, including prepayments for 2026 if beneficial.

• Education: Lifetime Learning Credit or deductions for continuing education, work-related courses, certifications, or training.

• Tax loss harvesting: Offset gains with investment losses (up to $3,000 excess against ordinary income).

• Credits to consider (though not deductions, they reduce tax liability): Childcare, adoption, R&D (for businesses), Work Opportunity Tax Credit, energy efficiency.

• Businesses: Reconcile payroll and prepare for Q4 estimated payments (due Jan 15, 2026); net operating losses (NOL) carryovers.

• Estate/gift planning: Leverage exemptions for gifting to reduce future taxes.

Track all receipts and records meticulously. For businesses, use Schedule C (Form 1040); individuals file Form 1040. Avoid Alternative Minimum Tax (AMT) surprises by projecting your liability. Act promptly to secure these benefits before year-end.

If you or someone you know needs assistance in maximizing their tax deductions for 2025, don’t hesitate to reach me at www.Passelliaccountingserviesllc.com or 561-386-3997, available 24/7,