Novemeber 2025

Bonus Depreciation and Year-End Tax Strategies for Small Businesses

As the year comes to an end, business owners have new opportunities to reduce their 2025 tax bills thanks to recent legislation and established savings tools. Two of the most effective options are bonus depreciation and retirement plan contributions, both of which can make a meaningful difference before the year closes.

Under the “One Big Beautiful Bill Act” (OBBBA), first-year bonus depreciation has been permanently restored to 100%. This change reverses the prior schedule that would have reduced bonus depreciation to 40% for 2025 (60% for certain long-production assets) and phased it out completely after 2026. Now, businesses that acquire and place qualifying assets in service after January 19, 2025, and before December 31, 2025, can deduct the full cost in the first year, significantly lowering their taxable income.

Eligible assets include most depreciable personal property such as equipment, computer hardware, certain vehicles, and off-the-shelf software. Qualified improvement property (QIP), which covers interior improvements to nonresidential buildings already in service, also qualifies. However, structural changes like enlarging a building do not qualify and must still be depreciated over 39 years. Unlike Section 179 expensing, which is limited to $2.5 million for 2025 (up from $1.25 million before the OBBBA) and phases out for larger investments, bonus depreciation has no dollar limit. Even so, taxpayers should be cautious of related rules that could restrict deductions.

One such limitation is the excess business loss rule. It applies to individual taxpayers with income from sole proprietorships or pass-through entities such as partnerships, S corporations, and limited liability companies. For 2025, business losses can offset other income sources—like wages, self-employment income, dividends, and capital gains—only up to $313,000 for single filers or $626,000 for joint filers. Any loss beyond those thresholds must be carried forward as a net operating loss. As a result, even though 100% bonus depreciation is available, some taxpayers may find that their current-year deduction is limited.

Another way to reduce taxable income is by contributing to a retirement plan. Tax-favored plans such as SEP IRAs, 401(k)s, SIMPLE IRAs, and defined benefit plans can provide both immediate tax deductions and long-term savings. For 2025, self-employed individuals can contribute up to 20% of their net income to a SEP IRA, capped at $70,000. For corporate employees, the limit is 25% of salary, also capped at $70,000.

The combination of permanent 100% bonus depreciation and generous retirement contribution limits gives business owners powerful tools for 2025 tax planning. Because every situation is unique, consulting a tax professional can help tailor these strategies for maximum benefit.

Top 5 Year-End Tax Moves for Business Owners in 2025

As the final months of the year approach, there’s still time for individuals to take meaningful steps to reduce their 2025 tax bills. Financial experts suggest several strategies that can help maximize deductions, minimize taxes, and make the most of charitable giving before year-end.

Here are five practical strategies to consider before year-end:

1. Use Bunching to Maximize Deductions
If your itemized deductions are close to the standard deduction, consider “bunching” expenses such as mortgage interest, state and local taxes, charitable gifts, and medical costs into one year. This strategy helps you exceed the standard deduction in one year while taking the standard deduction the next, capturing more total deductions over time.

2. Balance Gains and Losses
Review your investment portfolio for both realized and unrealized gains and losses. Selling appreciated securities held longer than a year qualifies for favorable long-term capital gains rates—typically 15% or 20%, plus a 3.8% net investment income tax for higher earners. Selling investments at a loss can offset gains, and if losses exceed gains, up to $3,000 can offset ordinary income, with the remainder carried forward. This approach can reduce taxes now and in future years.

3. Gift Appreciated Assets to Loved Ones
Gifting appreciated assets such as stocks or mutual fund shares to adult children or relatives in lower tax brackets can help reduce your taxable income. The recipient may sell the assets at a lower capital gains rate, possibly even 0%. However, be mindful of the “kiddie tax,” which applies to children under 19 (or under 24 if full-time students), and check for potential gift tax implications.

4. Give Wisely to Charities
Instead of cash, donate appreciated stock or mutual fund shares held for more than a year. This allows you to avoid paying capital gains tax and still deduct the full market value if you itemize. Alternatively, selling investments at a loss and donating the proceeds lets you claim both a capital loss and a charitable deduction. With some tax rules tightening in 2026, larger gifts before year-end may be especially beneficial.

5. Use Your IRA for Charitable Donations
If you’re age 70½ or older, consider making charitable donations directly from your IRA using qualified charitable distributions (QCDs). You can contribute up to $108,000 in 2025 directly to eligible charities, keeping those amounts out of your taxable income. This reduces adjusted gross income, which can help preserve eligibility for other tax benefits.

Before acting, consult a tax professional to tailor these strategies to your individual financial situation and maximize year-end savings.

IRS Rules on Holiday Parties and Employee Event Deductions

The holiday season has arrived, and for many workplaces, that means celebrating with a company party. While the rules for deducting business entertainment expenses changed several years ago, certain holiday gatherings may still qualify for tax deductions, possibly allowing businesses to write off the entire cost. Understanding these rules before planning can help employers avoid costly mistakes.

Before the Tax Cuts and Jobs Act (TCJA) of 2017, businesses could deduct 50% of certain entertainment expenses, such as taking clients to events following contract negotiations. However, the TCJA permanently eliminated most deductions for entertainment beginning in 2018. One important exception remains: a company-wide party for employees may still be fully deductible. Qualifying expenses can include food and beverages, decorations, venue and furniture rentals, prizes, giveaways, and entertainment such as a DJ or live band. To claim the deduction, the event must be reasonable rather than lavish and extravagant, and all employees must be invited. Parties limited to management or family members generally do not qualify, since the IRS treats these gatherings as events for owners or officers under family attribution rules.

Including nonemployee guests can further affect deductions. For instance, if a company spends $10,000 on a holiday party attended by 40 employees, their 40 partners, five friends, three business associates, and two independent contractors with guests, the total of 100 attendees represents $100 per person. The business may deduct $8,000 for the 80 employee-related attendees, while the $2,000 attributed to other guests is considered personal and non-deductible. Independent contractors are treated as nonemployees, even if they perform similar work.

To safeguard deductions, companies should maintain detailed receipts and records, keep costs in line with business size, and limit the number of personal guests. Consulting a tax professional before hosting the event can help ensure compliance while allowing businesses to celebrate responsibly and claim the deductions they’re entitled to.

How to Maximize Tax Savings on Charitable Donations

Charitable giving not only supports worthy causes but can also provide valuable tax benefits for donors. Individuals who make contributions by December 31 and itemize deductions on their 2025 tax returns may be eligible to claim a charitable deduction, provided they follow IRS guidelines.

To qualify, donations must be made to organizations recognized as tax-exempt by the IRS. Donors can verify a charity’s status using the Exempt Organizations Select Check tool on the IRS website. It’s also important to determine the fair market value of any goods or services received in exchange for a contribution. For example, if you donate $500 and receive event tickets in return, the value of those tickets must be subtracted from the donation amount to calculate the allowable deduction.

Substantiation requirements vary depending on the type and amount of the donation. Cash contributions generally require a receipt or bank record, while property donations may need additional documentation. In some cases—particularly for high-value items—a professional appraisal may be required to support the deduction.

Following these rules ensures compliance and maximizes potential tax savings. For questions about charitable deduction requirements or how they apply to specific gifts, consult a tax professional before filing your 2025 return.

Tax-Free Gift Limits for 2025 and 2026 Announced

As the year draws to a close, taxpayers have an opportunity to combine estate planning with tax savings by taking advantage of the annual gift tax exclusion. For 2025 and 2026, the exclusion amount is $19,000 per recipient. This means individuals can give up to $19,000 in cash or property to as many family members or friends as they wish without triggering any gift tax. Married couples can effectively double this amount, jointly giving up to $38,000 to each recipient tax-free.

In addition, married taxpayers can generally transfer unlimited assets to their U.S. citizen spouses without incurring gift tax. However, if the recipient spouse is not a U.S. citizen, the annual exclusion limit is lower—$190,000 for 2025 and $194,000 for 2026. Gifts exceeding those amounts may require the filing of a federal gift tax return.

It’s important to remember that annual exclusions must be used by December 31 each year; they do not carry over. For instance, if you skip making a gift in 2025, you can’t combine that year’s unused exclusion with the next year’s to make a larger tax-free gift in 2026. To ensure compliance and optimize your gifting strategy, consult a tax advisor before year-end.

Review and Refresh Your Chart of Accounts

November is the perfect time to fine-tune your bookkeeping system — and one of the most overlooked areas is your chart of accounts (COA). A well-organized COA makes financial reporting easier, improves budgeting accuracy, and helps ensure your year-end data is clean and ready for tax filing.

Start by reviewing your income and expense categories. Remove outdated or redundant accounts that no longer serve your business, and merge any duplicates that may have appeared over time. This reduces clutter and makes your reports easier to interpret.

Next, check that your accounts are properly categorised according to your current operations. For example, if you’ve added new products or services this year, create separate income accounts to track their performance. Similarly, if your business has new recurring expenses, add relevant categories to reflect them accurately.

You should also verify account numbering and hierarchy so financial data flows consistently from bookkeeping to reporting. A clear, logical structure allows you and your accountant to spot trends quickly and ensures consistency across financial statements.

Finally, make sure your chart of accounts aligns with your tax reports requirements. Doing this review in November gives you time to make adjustments before closing the year — leading to cleaner books, more meaningful insights, and smoother tax preparation.