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2025 Year-End Tax Planning Considerations

November 5, 2025

The One Big Beautiful Bill Act was one of the latest law changes to impact taxpayers, and with the many changes it introduced, it is more important than ever to evaluate various tax planning opportunities. SFMG is monitoring tax law closely and will notify clients of any major changes. In the meantime, the following are some items to consider before year-end:

New in 2025 – ONE BIG BEAUTIFUL BILL ACT (OBBBA)

  • Permanent Tax Brackets: The OBBBA made permanent the individual income tax brackets established under the 2017 Tax Cuts and Jobs Act, keeping rates between 10% and 37% and maintaining the structure for married and single filers.
  • Expanded Standard Deduction: The Act increased the standard deduction, including an additional boost for seniors, allowing taxpayers to reduce taxable income without itemizing deductions.
  • Trump Accounts: Tax-advantaged savings accounts were introduced, designed for children born between 2025 and 2028, to save for various life expenses. Each account receives an automatic $1,000 initial government deposit and will last until the child’s age 18.
  • Child and Family Credits: The OBBBA increased the child tax credit and indexed it for inflation, providing additional relief to families.
  • Estate and Gift Tax Changes: The $13.99m per individual estate tax exemption was made permanent, indexed for inflation.
    • Beginning in 2026, charitable gifts must exceed 0.5% of AGI to be deductible with the maximum benefit capped at the 35% rate. (This rule is not applied to Qualified Charitable Distributions (QCDs))
  • For additional information, visit SFMG’s OBBBA Blog Post and the IRS website.

Corporate Transparency Act (CTA) – UPDATES

  • As of March 2025, U.S.-formed companies and U.S. persons are fully exempt from reporting beneficial ownership information.
  • For more information, visit https://www.fincen.gov/boi.

Secure Act 2.0 – UPDATES

  • The SECURE Act 2.0 delayed the Required Beginning Date (RBD) for mandatory distributions to age 73 for those born from 1951-1959 and age 75 for those born in 1960 or later.
  • Penalties for not taking Required Minimum Distributions (RMDs) were reduced from 50% to 25%. If the error is corrected promptly, the penalty is further reduced.
  • Employers may make matching contributions or nonelective contributions to employee Roth 401(k)/403b plans if the Roth option is available.
  • Earners now have the choice to contribute to a Roth SIMPLE IRA and Roth SEP IRA.
  • Beneficiaries of traditional inherited IRAs must take annual Required Minimum Distributions (RMDs) if the account owner died on or after their RBD.
  • If the account owner died before their RBD, beneficiaries must empty the account by the end of the 10th year following the owner’s death.
  • Catch-up contributions for employer retirement plans (401(k), 403b) increased to the greater of $10,000 or 150% of the regular catch-up contribution ($7,500) for those age 60-63. For SIMPLE plans, the limit is the greater of $5,000 or 150% of the regular SIMPLE catch-up.
  • Beginning in 2026:
    • If you earn more than $145,000 from your employer in the prior year, your catch-up contributions must be Roth (after-tax).

Take Advantage of Tax-Deferred Growth 

  • Take full advantage of available retirement plans (401(k), IRA, SEP IRA, Defined Benefit, etc.) and other non-qualified plans (executive bonus, carve-out plans, deferred compensation, etc.) to defer and/or minimize income taxes over the long-term. The IRA contribution limit for 2025 is $7,000 with an additional $1,000 catch-up contribution if over age 50. Contribution limits for 401(k)s are $23,500 with an additional $7,500 catch-up contribution if over age 50.
  • Note that the window to make contributions to an employer plan typically closes at the end of the year, while taxpayers generally have until the April 15th income tax deadline to make IRA contributions to Traditional and Roth IRAs.
  • If eligible, maximize contributions to Health Savings Accounts, which are pre-tax and tax-deferred funds that can be withdrawn tax-free for future medical expenses. Taxpayers may be able to defer an additional $4,300 (individual plans) — $8,550 (family plans) of income with an additional $1,000 catch-up contribution for those over age 55.

Revisit Charitable Giving Strategies

  • Use a Donor Advised Fund to make a future donation to charity but receive a current income tax deduction. With the higher standard deduction in 2025 ($30,000 for married filing jointly and $15,000 for single filers, and an additional $6,000 for seniors aged 65 and above), this is a great tool that allows taxpayers to donate multiple years’ worth of gifts in one year while being able to control the future distribution of funds.
  • Consider gifting appreciated securities to avoid potential capital gains taxes. Be aware that if donating securities, it could take custodians up to two weeks to process and should therefore be initiated before 12/15/2025 to ensure it will qualify for a 2025 deduction.
  • For taxpayers 70.5 or older, consider donating up to $108,000 directly from your IRA to a charity. This Qualified Charitable Deduction (QCD) will allow those who no longer qualify for itemized deductions to reduce their taxable income through charitable contributions.

Estate and Gift Taxes

  • The maximum federal estate tax rate is 40%, and the estate tax exemption is $13.99 million for single filers and $27.98 million for married couples in 2025.
  • Be aware that the annual federal gift tax exclusion allows the taxpayer to give away up to $19,000 in 2025 ($38,000 for married couples) to as many people as the taxpayer wishes without those gifts counting against the lifetime estate tax exemption.
  • Tuition and medical expense payments made directly to the institution on behalf of another person do not count against the annual or lifetime gift exclusion amount.
  • Consider wealth transfer strategies to reduce taxable estate and ensure that assets will be utilized according to the taxpayer’s wishes, both now and in the future. We recommend discussing estate planning with us and an estate attorney prior to year-end if interested in these strategies.
  • Beginning in 2026, the federal estate tax exemption is scheduled to permanently increase to $15 million, indexed for inflation thereafter.

Homestead Exemption Audit – REMINDERS

  • Appraisal districts began developing and implementing a homestead exemption audit in January of 2024. Effective as of September 1, 2023, Appraisal Districts must verify residences are still eligible for the homestead exemption every 5 years.
  • Most Appraisal Districts will mail taxpayers a notice instructing them to reapply or verify their exemption within the timeframe stated in the letter.
  • You may not have received a request like this before, so it’s important to watch for any correspondence from your local appraisal district and respond promptly.
  • Failure to respond may result in the removal of your homestead exemption, which could increase your property taxes.

 

The purpose of the update is to share some of our current views and research.  Although we make every effort to be accurate in our content, the data is derived from other sources and should be reviewed carefully.  While we believe these sources to be reliable, we cannot guarantee their validity.  SFMG is not a CPA firm and does not provide tax advice.  Please contact your tax advisor for discussion regarding specific tax planning strategies.