Year-End Individual Tax Planning Opportunities
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Year-end is rapidly approaching, as are the holidays. So, before you become distracted with the seasonal celebrations, it may be in your best interest to consider year-end tax moves that can benefit you for your 2025 tax filing. Here are last-minute tax issues you might consider:
Not Needing to File a 2025 Return?
- If your income and tax situation is such that you do not need to file for 2025, don’t overlook the opportunity to bring in some additional income, to the extent it will be tax-free. For instance, if you have appreciated stock that you can sell without incurring any tax, consider selling it, or perhaps take a tax-free IRA distribution if you are 59½ or older or if younger and qualify for an exception to the “early withdrawal” penalty.
Also, just because you are not required to file a tax return does not mean you shouldn’t. By not filing you may miss out on some substantial refundable tax credits.
Is Your Income Unusually Low This Year?
If your income is unusually low this year, you may wish to consider converting some or all your traditional IRA into a Roth IRA. The lower income likely results in a lower tax rate, which provides you an opportunity to convert to a Roth IRA at a lower tax amount. Also, if you have stocks in your retirement account that have had a significant decline in value, it may be a good time to convert to a Roth.
Are Your Children Attending College?
If you qualify for either the American Opportunity or Lifetime Learning education credits, check to see how much you will have paid in qualified tuition and related expenses during 2025. If it is not the maximum allowed for computing the credits, you can prepay 2026 tuition if it is for an academic period beginning in the first three months of 2026. That will allow you to increase the credit for 2025. This is especially effective for students just starting college who only have tuition expenses for part of the year.
Did You Sell Your Home This Year?
If so, and if you meet the ownership and occupancy tests, the gain from selling your main home will not be taxed, up to $250,000 ($500,000 if you file a joint return with your spouse who also meets the occupancy test). But if you don’t meet the requirements of both owning and using your home for 2 years in the 5 years counting back from the sale date, you may still qualify for a partial home sale gain exclusion. For example, you may qualify for a reduced exclusion if you sold your home to relocate this year because of a change in employment or due to health. We can determine the amounts of excluded income and taxable gain, and project how your taxes will be impacted.
Do You Have an Employer Health Flexible Spending Account?
If so, and if you contributed too little to cover expenses this year, you may wish to increase the amount you set aside for next year. The maximum contribution for 2025 is $3,300. The amount you haven’t used in 2025 that may be carried to 2026 is $660 and must be used in the first 2½ months of 2026.
Did You Become Eligible to Make Health Savings Account (HSA) Contributions This Year?
If you become eligible to make health savings account (HSA) contributions late this year, you can make a full year’s worth of deductible HSA contributions even if you were not eligible to make HSA contributions for the entire year. This opportunity applies even if you first become eligible in December. In brief, if you qualify for an HSA, contributions to the account are deductible (within IRS-prescribed limits), earnings on the account are tax-deferred, and distributions are tax-free if made for qualifying medical expenses.
Have You Funded Your Retirement Savings?
Be sure to maximize your retirement plan contributions before year-end. Once the year is gone, you have forever lost an opportunity to make this year’s annual tax-advantaged addition to your savings for future retirement, which won’t be all that pleasant without a substantial retirement nest egg. If your employer matches some of the amount you contribute to your 401(k) or another eligible retirement plan, be sure to contribute as much as you can to take full advantage of this perk. If the contributions are tax-deductible, such as to a traditional IRA, or made with pre-tax income, maximizing the contributions may also cut your tax bill.
Married and Spouse Does Not Work?
If one spouse works and the other does not, tax law allows the non-working spouse to base his or her contribution to an IRA on the working spouse’s income. This tax benefit is frequently overlooked when spouses have been working and basing their individual contributions on their own income for years and then one of the spouses retires. Even if the working spouse has a retirement plan at work and his or her income precludes making an IRA contribution, the non-working retired spouse can still contribute based on the working spouse’s income.
Are You Age 60 to 64 This Year?
Starting in 2025, individuals are eligible for increased retirement plan catch-up contribution limits, set at 150% of the standard catch-up limit, which translates to $11,250 for employer plans and $5,250 for SIMPLE plans. These catch-up contributions are designed to boost retirement savings during the final working years and are subject to cost-of-living adjustments to ensure they remain beneficial relative to inflation. This provision specifically targets SIMPLE, 401(k), 403(b), and other qualified employer plans, offering a strategic advantage to older employees seeking to maximize their retirement savings in a relatively short timeframe before retirement. These enhanced amounts do not apply to IRAs.
Are You Expecting a Bonus This Year?
If a job-related bonus is expected to be paid around the end of the year, you might be able to defer that income into next year if that is appropriate in your situation, such as when you expect less ‘other’ income next year. See if your employer is willing to put off payment until just after the first of the year.
Do You Need to Take a Required Minimum Distribution (RMD)?
Once U.S. taxpayers reach the age of 73, they are required to take what is known as a “required minimum distribution” from their qualified retirement plan or traditional IRA every year. If this is the first year that this rule applies to you and you haven’t withdrawn the required amount yet, there’s no need to panic – you don’t have to do so until sometime during the first quarter of next year. Of course, if you wait until 2026 to take your 2025 distribution, you’re going to end up having to take two distributions in one year – one for 2025 and one for 2026.
If you have been required to take an RMD before 2025, you only have until December 31st to take the required distribution for 2025 if you want to avoid penalties.
For those who inherited a retirement account and are required to distribute the entire account within 10 years, be aware RMD from those accounts is also required beginning for 2025.
Do You Have Stocks That Have Declined in Value?
While most stocks have trended up this year, you should still review your stock portfolio to identify any losers and consider selling those under-water stocks to offset capital gains that would otherwise be subject to the 15% or 20% long-term capital gains tax rate. Capital losses can also offset up to $3,000 ($1,500 in the case of a married taxpayer filing a separate return) of ordinary income if capital losses exceed capital gains by at least that amount. Recognizing capital losses to offset capital gains can also reduce the amount of income subject to the net investment income surtax. Be aware of the wash sale rules that don’t allow you to deduct a loss if you repurchase those loser stocks within 30 days before or after the sale date.
Do You Have Stocks That Have Appreciated in Value and Your Income Is Low This Year?
There is a zero long-term capital gains rate for taxpayers whose taxable income is below the 15% capital gains tax threshold. This may allow you to sell some appreciated securities that aren’t in an IRA or retirement account that you have owned for more than a year and pay no or very little tax on the gain. The 2025 15% capital gains tax bracket starts at a taxable income of $96,701 for married joint filers, $64,751 for those filing as head of household, and $48,351 for all other filers.
Have You Considered Prepaying State Income and Property Taxes?
The One Big Beautiful Bill Act (OBBBA) increased the deduction limit for state and local taxes (SALT) starting in 2025. If you are not subject to the alternative minimum tax and you itemize your deductions, you are eligible to deduct both your property taxes and state income (or sales) tax up to a maximum of $40,000 for 2025, up from $10,000 in 2024. Did you know that in some cases, and of course if you haven’t exceeded the cap, you can increase the amount that you deduct on your 2025 return by prepaying some of the taxes by December 31, 2025? You can ask your employer to boost the amount of your state withholding by a reasonable amount; or, if you are self-employed, pay your 4th-quarter state estimated tax installment in December (otherwise due in January) and increase your deduction. The same is true for your real estate taxes: if you pay your first 2026 installment in 2025, you can take it as part of your 2025 deduction.
Are You Planning Your Charitable Deductions?
Many people who itemize take advantage of the ability to take a deduction for their donations to their favorite charities or house of worship. Did you know that you can choose to pay all or part of your 2026 planned giving in 2025 to increase the amount you deduct in 2025? Though this may not be appealing to those who itemize every year, if you alternate between taking the standard deduction one year and itemizing the next, this can give you a big boost.
If you itemize deductions, there is another reason you might consider increasing your 2025 contributions in lieu of making the donations in 2026. Starting in 2026, there is a 0.5% floor on charitable deductions for individuals who itemize, meaning the amount of charitable contributions for the year is reduced by 0.5% of the taxpayer’s adjusted gross income. This is like the way the medical deduction works, where medical expenses are reduced by 7.5% of AGI.
Charitable contributions are deductible in the year in which you make them. If you charge a donation to a credit card before the end of the year, it will count for 2025. This is true even if you don’t pay the credit card bill until 2026. In addition, a check will count for 2025 if you mail it in 2025. For last-minute mailings, it may be appropriate to obtain proof of mailing from the USPS. And don’t forget to get an acknowledgment letter or document from each qualified organization that clearly states the donated amount and whether the charity gave you goods or services (other than certain token items and membership benefits) because of the contribution.
Did You Know You Can Make Charitable Deductions from Your IRA Account?
Those who are age 70½ or older are allowed to transfer funds (up to $108,000 for 2025) from their IRA to qualified charities without the transferred funds being taxable, provided the transfer is made directly by the IRA trustee to a qualified charitable organization. If you are required to make an IRA distribution (i.e., you are age 73 or older), you may have the distribution sent directly to a qualified charity, and this amount will count toward your RMD for the year.
Although you won’t get a tax deduction for the transferred amount, this qualified charitable distribution (QCD) will be excluded from your income, with the result that you may get the added benefit of cutting the amount of your Social Security benefits that are taxed. Also, since your adjusted gross income will be lower, tax credits and certain deductions that you claim with phase-outs or limitations based on AGI could also be favorably impacted.
If you plan to make a QCD, be sure to let your IRA trustee or custodian know well in advance of December 31 so that they have time to complete the transfer to the charity. If you have contributed to your traditional IRA since turning 70½, the amount of the QCD that isn’t taxable may be limited, so it is a good idea to check with this office to see how your tax would be impacted. You should be sure to obtain an acknowledgement from the charity as described in the “Are You Planning Your Charitable Deductions?” above.
One cautionary note: if you have made traditional IRA contributions after reaching age 70½, they will reduce this benefit.
Have Outstanding Medical or Dental Bills?
Taxpayers who itemize their deductions can deduct qualified medical and dental expenses that exceed 7.5% of their adjusted gross income. If you have reached that threshold or are close, then it may make sense for you to pay off any of those types of bills that are still outstanding rather than paying them over time. If you are near or above the limit, it may also make sense to look at what your medical and dental expenses will likely be for the next year and move those that you can into 2025 to increase the deduction. These expenses could include dental work or eyeglasses. An additional important issue: if you are thinking of doing this by using a credit card to make the payment, and you’re not going to pay the card balance immediately, make sure that you’re not paying more in interest than you’re saving with the increased tax deduction.
Have You Forgotten the Annual Gift Tax Exclusion?
Though gifts to individuals are not tax deductible, each year, you are allowed to make gifts to individuals up to an annual maximum amount without incurring any gift tax or gift tax return filing requirement. For the tax year 2025, you can give $19,000 (up from $18,000 in 2024) each to as many people as you want without having to pay a gift tax. If this is something that you want to do, make sure that you do so by the end of the year, as you are not able to carry the $19,000, or any unused part of it, over into 2026. Such gifts need not be in cash, and the recipient need not be a relative. If you are married, you and your spouse can each give the same person up to $19,000 (for a total of $38,000) and still avoid having to file a gift tax return or pay any gift tax. Speaking of spouses, there’s no limit on the excluded amount a spouse can gift to their wife or husband.
Do You Think You May Have Under-Withheld Taxes This Year?
Should your liability be greater than your prepayments by $1,000 or more, you may also be subject to underpayment penalties. This could simply be the result of under-withholding on your wages or underpaying estimated tax if you are self-employed, or of out-of-the-ordinary income, such as stock gains, sale of a business or rental or even winning big from the lottery. There are safe harbor prepayments to avoid a penalty, which require prepaying:
- 90% of the current year’s tax liability,
- 100% of the prior year’s tax liability, or
- 110% of the prior year’s tax liability, if the prior year’s AGI was over $150,000.
If you think there’s a chance that the income taxes you’ve paid to date for 2025 are insufficient, it’s a good idea to increase your withholding in the time that’s left before year-end to make up for it. Underpaying taxes makes you vulnerable to an underpayment penalty that is assessed quarterly. The good news is that even if you have underpaid for any or all the first three quarters of the year and will owe taxes when you file your 2025 return, you can catch up by boosting your year-end withholding, since federal withholding is deemed paid ratably throughout the year. Plus, increased withholding and possible payment of estimated taxes can also reduce the fourth quarter underpayment penalty.
Did You Suffer a Disaster Loss This Year?
2025 has had some significant disasters, including wildfires, severe storms, and flooding throughout the U.S. Any unreimbursed property losses incurred because of a federally declared disaster can be claimed on the current year’s tax return or, at the election of the taxpayer, on the prior year’s return (2024 for 2025 disasters), generally providing quicker access to a tax refund. However, care must be exercised to ensure a disaster loss is claimed on the return of the year that will provide the greater benefit. In addition, after insurance reimbursement is accounted for, the result may not be as expected and should be determined before making the decision of which year to claim a loss.
Did You Get Scammed This Year?
Generally, casualty losses are only allowed when related to a declared disaster. However, there is an exception for thefts or scam losses if the loss is related to a transaction entered for profit such as investments and retirement funds.
Divorced or Separated This Year?
A divorce or separation can have a significant impact on a couple’s tax filings. Filing joint or separate returns, who claims the children, the tax rules related to whether to take the standard deduction or itemize, how income and tax prepayments are allocated, and more issues need to be considered. Best to figure that all out in advance.
Energy & Environmental Tax Credits?
OBBBA terminated the electric vehicle credit for purchases after September 30, 2025. Although the time is short, the credit for energy efficient home modifications and the home solar credit are still available through the end of 2025.
Credit For Energy Efficient Home Modifications – This tax credit for making energy saving improvements to taxpayers’ existing homes has been around in various forms since 2006. The most recent credit rate is 30% with an annual cap of $1,200. That allows individuals to annually make up to $4,000 of creditable home energy improvements and benefit from the credit. There are annual limits for certain types of improvements; for example, there is a $600 annual credit limit for residential energy property expenditures, windows, and skylights, and $250 for exterior doors ($500 total for all exterior doors). In addition to the $1,200 annual cap, up to $150 of the cost for an energy audit performed by a certified home energy auditor on your primary residence is allowed.This credit is non-refundable (meaning it can only offset the current tax liability) and there is no carryover.
Solar Credit – There is a 30% nonrefundable federal tax credit for installing solar on your first and second homes (need not own the home). Unused credit can be carried forward to the subsequent year. Expenses of battery storage technology with a capacity of not less than 3 kilowatt hours count toward the credit. Battery and systems upgrades will qualify for credit even after the initial installation.
But keep in mind, to qualify for these two credits, the installations must be complete and paid for by December 31, 2025.
Have questions related to any of the above? Give this office a call.
Employment Practices Liability Insurance: What Growing Businesses Should Know Hiring employees is a major step for a small business. It means more help, more capacity, and more room to grow. It also means more responsibility. Most owners plan for payroll, taxes, workers' compensation, and training when they hire. Those costs are easy to see. The harder risk to spot is the one tied to employment decisions. Every business with employees makes decisions about: Hiring Pay Schedules Promotions Discipline Performance reviews Workplace complaints Termination Any of those decisions can lead to a claim. That is where Employment Practices Liability Insurance, often called EPLI, becomes important. Employment Practices Liability Insurance helps protect a business from certain claims made by employees, former employees, or job applicants. These claims may include wrongful termination, discrimination, harassment, retaliation, failure to hire, or failure to promote. In plain English, EPLI helps protect your business when someone says they were treated unfairly at work. This is not only a big-company issue. Small businesses can face employment-related claims too. In fact, they may be less prepared because they often do not have a full HR team, formal records, or consistent employment practices. The Insurance Information Institute explains that Employment Practices Liability Insurance protects employers against claims that workers' legal rights were violated. Those claims can include harassment, discrimination, wrongful termination, failure to hire or promote, wrongful discipline, and negligent evaluation. [1] Why EPLI Belongs in the Small Business Conversation Small businesses often feel personal. Owners know their teams. Managers solve problems quickly. Conversations happen in real time. That can be a strength. It can also create risk. A business owner may believe a decision was fair. An employee may see it differently. A missed promotion may feel like discrimination. A termination may feel like retaliation. A casual comment from a manager may be viewed as harassment. Employment Practices Liability Insurance does not mean a business has done something wrong. It means the business understands that workplace claims can happen, even when leaders are trying to make fair decisions. Small businesses may also have weaker documentation. Performance conversations may happen in person but never get written down. Hiring decisions may not follow the same process each time. Terminations may happen quickly, without a clear paper trail. That can make a claim harder to defend. The Equal Employment Opportunity Commission reported that it secured $660 million for 17,680 victims of employment discrimination in fiscal year 2025. For a small business, even one claim can create real financial strain.
This generation doesn’t wait for a paycheck. They create income on their own terms. Selling products online. Editing videos for clients. Running social media accounts. Picking up freelance work between classes or jobs. It’s flexible. It’s fast. And in a lot of cases, it works. But there’s one part no one really talks about: Most of it isn’t being tracked—or taxed—correctly. And that mistake doesn’t show up right away… it shows up later, all at once. The New Income Reality (That No One Really Explains) For Gen Z, income rarely comes from just one place. It’s usually a mix: A part-time job A few freelance clients Money from a side hustle Payments from apps or platforms Maybe even a little creator income Individually, none of it feels like a big deal. But combined? It absolutely is. Because from a tax perspective, it’s all income—and it all needs to be accounted for. Where Things Start to Go Wrong The problem isn’t effort. It’s that no one really teaches this. So a lot of people assume: “If it’s small, it doesn’t matter” “If I didn’t get a form, I don’t need to report it” “I’ll deal with it when I file” That last one is where most issues start. Because by the time you “deal with it,” the decisions that mattered have already been made. Mistake #1: Not Tracking Income Clearly When money comes in from multiple places, it’s easy to lose track. A few payments here. A deposit there. Something paid through an app that you forget about. But over time, it adds up. And without a clear record: You don’t know what you actually earned You can’t report accurately You’re more likely to miss income At the same time, many platforms are now reporting earnings directly. So if your numbers don’t match what’s reported… That’s when problems start. Mistake #2: Ignoring Estimated Taxes This is where most first-time earners get caught off guard. If you’re making money without taxes being withheld—like freelance work, side gigs, or creator income—you’re expected to pay taxes throughout the year. Not just once at filing. These are called estimated tax payments. And if you skip them, you may end up with: Penalties Interest A much larger bill than expected It’s not obvious—but it’s important. Mistake #3: Misunderstanding Write-Offs Write-offs get talked about a lot online. But they’re often misunderstood. A write-off isn’t: Everything you buy Anything loosely related to your work A way to avoid taxes entirely It has to be both: Ordinary and necessary for what you do. For example: A content creator can deduct editing tools or software A freelancer can deduct business-related subscriptions An online seller can deduct inventory costs But guessing—or copying advice from social media—can lead to mistakes. Mistake #4: Overlooking How Income Is Reported Today The way income is tracked has changed. More transactions are being reported: Payment apps Online platforms Digital marketplaces And in some cases, things like crypto or digital assets can also trigger reporting requirements. In other words: There’s less room for things to go unnoticed. Which makes it even more important to stay organized from the start. Why This Matters Earlier Than You Think Getting this wrong once? Usually fixable. But when it keeps happening, it builds: Back taxes Penalties Stress Missed opportunities to save The good news? Gen Z has an advantage most people don’t: Time to get this right early. The Opportunity: Build Good Habits Now When you understand your income and taxes early, you: Keep more of what you earn Avoid surprises at tax time Make better financial decisions Build confidence as your income grows It doesn’t have to be complicated. But it does have to be intentional. Final Thought Earning money in new ways is a huge opportunity. But without structure, it can also create unnecessary problems. The goal isn’t to overcomplicate things— It’s to get the basics right early, so everything gets easier as you grow. If you (or someone in your family or team) is earning income from multiple sources and is not sure how it all fits together, we're here for you. The earlier you get this right, the easier everything becomes. Request your free quote from Steven Brewer & Company CPAs today!
Hiring feels like growth. More people. More capacity. More momentum. But here’s what most business owners underestimate: The salary is just the starting point. By the time you factor in everything else, that “$70,000 hire” can quietly become a $90,000—or even $100,000—decision. And if you don’t plan for it? Hiring can slow your business down instead of moving it forward. Why Hiring Feels Simpler Than It Actually Is On paper, hiring looks straightforward. You need help. You set a salary. You make the offer. But the real cost doesn’t show up in the offer letter. It shows up in everything that comes after. The True Cost Breakdown (What Most People Miss) Salary is only one piece of the equation. Here’s what actually gets added on: 1. Payroll Taxes Employers are responsible for their share of: Social Security and Medicare Federal and state unemployment taxes That alone can add 7–10%+ on top of base salary. 2. Benefits (Even Basic Ones Add Up) Depending on your setup, this may include: Health insurance contributions Retirement plans Paid time off Even modest benefits packages can significantly increase your total cost per employee. 3. Software, Tools, and Equipment Every new hire needs access to: Software subscriptions Systems and platforms Equipment or workspace Individually small. Collectively meaningful. 4. Management and Training Time This is the most overlooked cost. New hires require: Onboarding Training Ongoing management Which means someone on your team is spending time not doing their core work. That’s a real cost—even if it doesn’t show up on a payroll report. Full-Time vs. Contractor: Not Always an Obvious Choice Hiring full-time isn’t always the best first move. In many cases, a contractor or fractional role can: Reduce upfront costs Eliminate benefit obligations Provide specialized expertise Give you flexibility as you grow This is why more businesses are turning to: Fractional CFOs Outsourced marketing teams Contract-based specialists It’s not about avoiding hiring. It’s about hiring intentionally. When Hiring Actually Hurts Growth It sounds counterintuitive—but hiring too early can create pressure instead of relief. Here’s how it happens: Revenue isn’t consistent yet Cash flow tightens Fixed payroll costs increase You feel pressure to “feed” the hire Instead of freeing you up… It adds stress to every decision. Growth doesn’t just come from adding people. It comes from adding people at the right time. A Smarter Approach to Hiring Decisions Before you make your next hire, ask: Is this role tied directly to revenue or efficiency? Can this function be outsourced first? Do we have consistent cash flow to support this long-term? What is the fully loaded cost—not just the salary? Because clarity here protects you later. What Strong Businesses Do Differently They don’t just hire when they feel busy. They hire when the numbers support it. They: Forecast the full cost Understand the ROI of the role Use flexible resources when needed Scale their team strategically—not reactively That’s what keeps growth sustainable. Final Thought Hiring is one of the biggest investments you’ll make in your business. Done right, it accelerates growth. Done too early—or without a full picture—it can slow everything down. The difference isn’t instinct. It’s clarity. Before your next hire, run the numbers—not just the salary. Contact Steven Brewer & Company CPAs today to evaluate the true cost of hiring, explore smarter staffing options, and make confident decisions that support long-term growth.