Year-end tax planning is not exactly the dazzling finale most entrepreneurs dream about as December approaches. But while it may not sparkle like a holiday party, it can save you a significant amount of money… and that’s the kind of year-end magic we can all get behind.
With the introduction of the One Big Beautiful Bill Act (OBBBA), several long-standing tax strategies are shifting, improving, and in some cases, returning like a rebooted movie franchise (but better written). As we head toward December 31, now is the time to evaluate which tax-saving opportunities fit your business.
Let’s break down the most impactful strategies so you can wrap up 2025 with financial confidence… and maybe a little extra budget for those office snacks everyone pretends not to eat.
1. Capital Asset Purchases: A Powerful Tool Gets Even Better
Thanks to bonus depreciation, year-end asset purchases have long been a favorite strategy for entrepreneurs looking to reduce taxable income. With OBBBA, this option becomes even more attractive for 2025.
Here’s what changed:
- Under the prior TCJA rules, bonus depreciation had dropped to 40% in 2025.
- OBBBA reverses that decline and restores 100% bonus depreciation permanently for qualifying new and used assets acquired and placed in service after January 19, 2025.
- Purchases before January 19 still fall under the 40% limit.
Even better, the Section 179 expensing limit increased to:
- $2.5 million expensing limit
- $4 million phaseout threshold (Both will adjust annually for inflation.)
Most assets eligible for bonus depreciation also qualify for Section 179. The difference is in flexibility:
- Section 179 allows you to choose which assets to expense.
- Bonus depreciation applies to an entire asset class (e.g., all 7-year property).
If you’re thinking about buying business vehicles, equipment, technology, or other capital assets before year-end, now is a great time to evaluate the tax impact. Just remember: vehicles come
with their own rulebook, and yes, the IRS does care how often you use them for “business” versus “grabbing lunch.”
A bonus perk: OBBBA also adjusts the business interest deduction formula beginning in 2025, allowing many businesses to deduct more interest tied to their financing. Translation? Your equipment loan just got a little friendlier.
2. PTET Deductions: Still Relevant, Even With a Higher SALT Cap
Pass-through entity tax (PTET) deductions became popular after the federal cap on state and local tax (SALT) deductions dropped to $10,000. They allowed S corporations, partnerships, and LLCs to pay state taxes at the entity level, generating a business deduction rather than a personal one.
OBBBA temporarily boosts the SALT cap to $40,000 starting in 2025. Sounds great, and it is… But there’s a catch:
- The higher cap phases out as modified adjusted gross income (MAGI) increases.
- At $600,000 MAGI, the cap snaps back to $10,000.
So yes, the PTET deduction may still be worth it, especially if:
- Your income is too high to benefit from the increased cap.
- You normally take the standard deduction.
- You want to reduce pass-through income to lower:
- Self-employment taxes
- The 3.8% net investment income tax
- Income-based phaseouts
- You’re strategically managing income to qualify for other deductions or credits.
Just note: While PTET can help with the Section 199A qualified business income (QBI) deduction, it can also reduce the size of that deduction. This is a “measure twice, elect once” type of decision.
3. Maximizing Your QBI Deduction Before the Year Ends
The QBI deduction allows many pass-through owners to deduct up to 20% of their qualified business income. That’s substantial – but it comes with rules, limitations, and thresholds.
OBBBA expands the phase-in ranges for these limits beginning in 2026. Until then, your 2025 strategies still matter.
To increase your QBI deduction for 2025, consider:
- Increasing W-2 wages if you’re bumping up against the wage limit
- Purchasing qualified property before year-end
- Using timing strategies such as accelerating expenses or deferring income
Think of this as aligning the puzzle pieces so the IRS gives you the full 20% benefit.
4. R&E Deductions: Better Options for Innovative Businesses
If your business invests in research or development, OBBBA brings welcome news.
Beginning in 2025:
- Domestic Section 174 research and experimental (R&E) costs can be capitalized and amortized over five years.
Additionally:
- Small businesses (average annual gross receipts of $31 million or less) can apply R&E deductions retroactively to 2022.
- Businesses of any size can accelerate remaining 2022-2024 amortization deductions over one or two years.
These changes don’t necessarily require immediate action before year-end, but they absolutely need to factor into your broader tax planning. Depending on your goals, you may choose to amortize expenses, recover deductions more quickly, or revisit prior years to capture missed benefits.
5. Don’t Forget the Classic Year-End Plays
Not everything has changed. Some tax strategies stand the test of time:
- Accelerate expenses into 2025 if you expect lower income next year.
- Defer income into 2026 if it keeps you in a better tax position.
- Increase retirement plan contributions (or establish a plan if you haven’t yet).
- Evaluate cash flow and projections to avoid springtime surprises.
Sometimes the simplest strategies are the most effective.
Smart Moves to Reduce Your 2025 Tax Bill
The OBBBA brings meaningful opportunities for entrepreneurs to proactively reduce taxes — but with new rules come new complexities. The best year-end tax plan is one that’s tailored, timely, and well-informed.
If you’re ready to explore which strategies fit your business, Harper & Co CPAs Plus is here to guide you, plan every detail and make smart decisions before December 31.
Let’s make this your most strategic year-end yet.
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