Last minute year end tax deductions to make

There is still about roughly two weeks left of 2025, meaning there is still time to make some year end tax moves. Both employed and self employed individuals/business owners have some last minute deductions they can make.

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, extended TCJA provisions, reinstated 100% bonus depreciation, expanded Section 179, and added new deductions (many temporary through 2028). Below is a high level summary of some of the deductions/tax advantageous moves that still can be made. If you need assistance, do not hesitate to reach out at to me.

1. Maximize Retirement Contributions

• 401(k)/403(b): Up to $23,500 (plus catch-up: $7,500 if 50). Deadline: December 31, 2025 (must be done via payroll contributions).

• Traditional IRA: Up to $7,000 ($8,000 if 50+). Deadline: April 15, 2026. Must be done by April 15th filing or extension if applicable.

• HSA (if eligible): $4,300 individual / $8,550 family (+$1,000 catch-up if 55+). Deadline: April 15, 2026. Must be done by April 15th filing or extension if filing.

For business owners/self-employed:

• SEP IRA: Employer-only contributions up to 25% of compensation (or ~20.5% of net self-employment income after adjustments), max $70,000. Ideal for variable income—contribute based on profits. No employee deferrals. Deadline: Tax filing date (April 15, 2026 for most; October 15th with extension). Flexible for year-end planning and can be used as a last minute deduction after prior year business income/profit is calculated.

• Solo 401(k) (One-Participant 401(k): Best for higher contributions. Easier to make, due to employer and employee contributions.

  • Employee deferral: Up to $23,500 (100% of compensation; + catch-up as above).

  • Employer profit-sharing: Up to 25% of compensation.

  • Total (under 50): Up to $70,000 (plus catch-up).

  • Allows Roth options and loans (unlike SEP).

  • Deadline: Plan must be established by December 31, 2025. Employee deferrals by year-end; employer contributions by tax filing (with extension).

  • Often allows more than SEP at lower/mid income levels due to deferral component.

2. Charitable Contributions Accelerate in 2025 (2026 adds restrictions).

• Bunch via donor-advised funds.

• Donate appreciated stock.

• QCDs (70½+): Up to $108,000 tax-free from IRAs.

3. Itemize vs. Standard Deduction

Standard: $15,750 single; $31,500 MFJ (increased under OBBBA).

• Itemize if higher (easier with SALT cap). Essentially, you or your accountant need to determine if its more advantageous to take the standard deduction (no additional work) or the sum of all itemized amounts is greater than the standard deduction. More information is available here.

• SALT: Up to $40,000 (phases out >$500,000 MAGI). Real Estate, State Taxes, and Local taxes are included in this calculation. If you prepay state/local tax prior to December 31st, 2025. This is a good deduction. Good strategy is to estimate your state tax based on prior year amount paid and make a payment to your State Revenue Department to deduct it on your federal tax return (1040 individual).

• Mortgage interest. This is good for individual who secured a mortgage with high interest in the last few years.

• Medical >7.5% AGI. Good if you spent a large amount of cash on medical expenditures (net of insurance).

4. New OBBBA Deductions (2025–2028):

• Seniors 65+: Extra $6,000 ($12,000 joint); phases out >$75,000 single/$150,000 joint.

• Tips: Up to $25,000. This is a deduction, specifically related to the amount of tips you receive at your W-2 Job.

• Overtime: Up to $12,500 single/$25,000 joint.

• Auto loan interest: Qualifying U.S. vehicles. Vehicles must be assembled in the US for qualifying interest deductions.

5. Business-Specific Deductions and Strategies

• Section 179 Expensing: Up to $2,500,000 (new/used equipment); phase-out >$4,000,000 purchases.

• 100% Bonus Depreciation: Full write-off (qualified assets acquired/placed after January 19, 2025). Normally done on equipment, vehicles, and real estate purchase (remember real estate depreciable basis is normally determined after you back out land value).

• Immediate Research and Development expenditures for qualifying expenditures.

• QBI: 20% for pass-throughs. Very powerful tool, but must be aware of Phase outs for Self Employed and S-Corps. See article here

• Accelerate expenses (prepay). If you have expenses you know you are going to spend in 2026 (inventory, rent, capital expenditure) try and prepay some of them towards the end of 2025, especially if you had a high income years.

• Employee bonuses (deductible if paid timely). Must be paid within 2.5 months of calendar/fiscal year end of your entity.

6. Tax Loss Harvesting

Tax-loss harvesting is a strategy where you sell investments (like stocks, bonds, ETFs, or mutual funds) that have declined in value to realize a capital loss. This loss can offset capital gains from other investments, reducing your taxable income. If losses exceed gains, you can deduct up to $3,000 ($1,500 if married filing separately) against ordinary income (e.g., wages). Any remaining losses carry forward indefinitely to future years.

It’s particularly useful at year-end (like now in December 2025) to lower your 2025 tax bill, especially if you’ve realized gains earlier in the year or from mutual fund distributions.

Example of Tax Loss Harvesting:

• You sell Stock A for a $8,000 long-term loss.

• You have $5,000 long-term gain from Stock B.

• Result: Loss offsets gain fully ($0 tax on gain) + $3,000 deduction against ordinary income.

• Remaining $0 (all used); if loss was $12,000, $4,000 carries forward.

Key Rule: Wash-Sale Rule - You cannot claim the loss if you buy the same or a “substantially identical” security within 30 days before or after the sale (61-day window total). This applies across all your accounts (including IRAs, spouse’s accounts).

• Violation: Loss is disallowed and added to the basis of the new shares (defers the loss).

• Safe swaps: Sell one S&P 500 ETF and buy a different one; sell an individual stock and buy a sector ETF.

• Note: Wash-sale rules do not currently apply to cryptocurrencies. This mean you can sell cryptocurrency at a loss on December 31st 2025 and rebuy it on January 1st 2026. Locking in the loss for 2025.