At Associated Investor Services, one of our main goals is to help clients recognize tax reduction opportunities within their investment portfolios and overall financial planning strategies. Staying current with the ever-changing tax environment is a key component to helping our clients benefit from potential tax reduction strategies.
As you probably know, 2025 brought significant changes to the tax code. The One Big Beautiful Bill Act (OBBBA) brought many new tax law changes that commence this year as well as made permanent many of the 2017 Tax Cuts and Jobs Act (TCJA) provisions that were scheduled to sunset at the end of this year. This report focuses on information that could be helpful for individuals when tax planning for the calendar year 2025.
As financial professionals, we want to be proactive. The primary objective of this report is to share strategies that could be effective if considered and implemented before year-end. Please note that this report is not a substitute for using a tax professional. In addition, many states do not follow the same rules and computations as the federal income tax rules. As always, please make sure you check and coordinate with your tax preparer on your personal situation to see what tax rates and rules apply to your federal and state tax returns.
Income Tax Rates for 2025
For 2025, there are seven tax rates. They are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This structure was set to be phased out on January 1, 2026; however, the One Big Beautiful Bill Act (OBBBA) made these tax brackets permanent, saving millions of taxpayers from a tax increase.
Year-End Tax Planning for 2025
One of our primary goals at Associated Investor Services is to help our clients optimize their tax situations. This report provides various suggestions and reviews strategies that can be useful in achieving this objective.
Since everyone’s situation is unique, it’s important for every taxpayer to start their year-end planning now. The appropriate strategies you use will depend on your income and other personal circumstances. As you go through this report, it may be helpful to note any strategies that seem relevant to your situation so you can discuss them with your tax preparer.
Some items to consider include:
- Evaluate the use of itemized deductions versus the standard deduction
- Review your charitable giving
- Review your capital gains and losses
- Review your retirement savings options
- Consider Roth IRA conversions
- Review your home equity debt interest
- Revisit the use of qualified tuition plans
- Maximize your qualified business income deduction
- Review your estate and gifting strategies
Standard Deduction Updates
Effective for 2025 tax returns, the standard deduction amounts will increase to $15,750 for individuals and married couples filing separately, $23,625 for heads of household, and $31,500 for married couples filing jointly and surviving spouses.
The OBBBA not only made this deduction increase permanent, but it also slightly increased the deduction amount.
For 2025:
- Additional deduction for those age 65 or older or blind: $2,000 for single/HOH; $1,600 per person for married couples
- New “senior bonus tax deduction”: up to $6,000 per individual ($12,000 for couples). Phases out beginning at $75,000 MAGI for singles and $150,000 MAGI for married couples, disappearing fully at $175,000 and $250,000 respectively. Available through 2028.
Although personal exemption deductions are no longer available, the larger standard deduction, combined with lower tax rates and an increased child tax credit, could result in less tax.
Charitable Giving Strategies
For taxpayers who are inclined to give to charity, it’s wise to develop a strategic plan. One effective method is "bunching," which involves consolidating donations into specific years to maximize deductions.
Another strategy is a donor-advised fund (DAF), which allows for immediate deductions while deferring grants to charities. Taxpayers can arrange their situation to take advantage of the charitable deduction in higher marginal tax years.
Qualified Charitable Distributions (QCDs) remain available:
- IRA owners 70½ and older can transfer up to $108,000 directly from an IRA to charities, satisfying RMD requirements and avoiding taxable income.
Other charitable reminders:
- Cash donations must be made by December 31, 2025, with receipts kept
- Appreciated securities held over one year can be donated to avoid capital gains
- Do not donate assets with a loss; sell them first, then donate proceeds
Mortgage and Home Equity Interest
The OBBA made TCJA mortgage provisions permanent. Mortgage interest remains deductible (up to $750,000 of debt for homes purchased after December 15, 2017). Older mortgages may retain the $1,000,000 threshold. HELOC and refinance interest may qualify if used for home improvements or investments.
Education Planning and 529 Plans
529 plans remain a valuable, tax-efficient tool.
Updates include:
- Annual contribution exclusion: $19,000 per donor per beneficiary in 2025
- Option to front-load $95,000 in one year (treated as spread over 5 years)
- Expanded eligible expenses: up to $10,000/year for K–12 tuition and credentialing programs
- Some states offer tax deductions or credits on contributions
Associated Investor Services often works with parents and grandparents to use 529s not just for education, but also as part of estate planning strategies.
Retirement Planning Updates
- 401(k), 403(b), 457, TSP limits: $23,500 (plus $7,500 catch-up for 50+)
- New “super catch-up”: $11,250 for ages 60–63• IRA contribution limits: $7,000 ($8,000 if 50+)
- Roth IRA income cutoffs: $236,000–$246,000 for married filers; $150,000–$165,000 for singles
- Saver’s Credit thresholds: $79,000 (married), $59,250 (HOH), $39,500 (single)
Note: Only one IRA-to-IRA rollover allowed per 12 months. Trustee-to-trustee transfers are unlimited.
Roth IRA Conversions
Some IRA owners may consider converting traditional IRAs to Roth IRAs in 2025. Conversions create immediate tax liability, so it is critical to run projections with a qualified advisor.
Our team at Associated Investor Services can help evaluate whether this makes sense for your broader financial picture.
Capital Gains and Losses
- Review realized and unrealized gains and losses
- Loss harvesting: use losses to offset unlimited capital gains and up to $3,000 of ordinary income
- Wash-sale rule: wait 30 days before repurchasing the same security
- Long-term capital gains rates for 2025:
- 0% up to $48,350 (single) / $96,700 (married)
- 15% up to $533,400 (single) / $600,050 (married)
- 20% above these thresholds
Business Owners – Section 199A Deduction
The Qualified Business Income (QBI) deduction of up to 20% is now permanent. Applies to many owners of pass-through businesses, subject to income phaseouts starting at $197,300 (single) / $394,600 (married).
If you’re a business owner, Associated Investor Services can coordinate with your CPA to review eligibility and strategy.
Estate, Gift, and GST Planning
- 2025 annual gift exclusion: $19,000 per doner ($38,000 for couples)
- Unlimited tax-free gifts for medical or tuition expenses if paid directly
- 2025 estate and GST exemption: $13.99M ($27.98M married)
- Increases in 2026: $15M ($30M married)
- Step-up in cost basis at death remains in place
Additional Notable Tax Changes for 2025
- Medical expense deduction floor: 7.5% of AGI
- SALT deduction cap raised to $40,000 (phased down for incomes over $500,000)
- Expanded child tax credit: $2,200 per child
- New deductions: interest on U.S.-assembled car loans, tips, and overtime pay
- "Trump Account": $1,000 seeded for each child born 2025–2028, operational in 2026
2025 Year-End Tax Planning Checklist
- Bracket Management
- Itemized Deduction Timing
- Gain & Loss Harvesting
- Retirement Planning
- Education Planning
- Charitable Planning
- Gifting Strategies
- Estate Tax Planning
- Planning for Major Financial or Life Events
Conclusion
One of our primary goals at Associated Investor Services is to keep clients aware of tax law changes and updates. This report is not a substitute for using a tax professional. Please note that many states do not follow the same rules and computations as the federal income tax rules. Make sure you check with your tax preparer to see what tax rates and rules apply for your state.
There are many other additional tax reduction strategies that will vary depending on your financial picture. We encourage you to come in so that we can review your situation and hopefully take advantage of those tax rules that apply to you. We will continue to monitor impactful changes and appreciate the opportunity to assist you in addressing your financial matters.
Contact Associated to discuss your personalized 2025 year-end planning strategy.
Disclaimer
The views stated in this article are not necessarily the opinion of our broker/dealer and should not be construed as an offer to buy or sell any securities. Information is based on sources believed to be reliable; however, their accuracy cannot be guaranteed. Statements may be subject to change with revisions to the tax code or government policy. Investors should consult a tax advisor before making conversions, charitable contributions, or other tax-sensitive decisions. Rules governing 529 plans, IRAs, and other tax-advantaged vehicles vary by state and are subject to change. Source: IRS.gov.