2025 Year-End Tax Planning Letter

As we approach the end of 2025, it is more important than ever to consider how recent legislative and economic developments may impact your tax and financial strategies. This year, the passage of the One Big Beautiful Bill Act (OBBBA) brought sweeping changes to the federal tax landscape, making permanent many provisions originally set to expire and introducing new opportunities and considerations for individual taxpayers. While Pennsylvania’s individual tax system remains largely unchanged, it is essential to review both federal and state updates to ensure your planning is current and effective.

Proactive tax planning remains a cornerstone of financial security. By understanding and acting on these changes, you can minimize your tax liabilities, enhance your cash flow, and position yourself for long-term success. Below, we highlight key issues and strategies to consider as you prepare for year-end and the 2025 tax filing season. Please note this is not an exhaustive list, and we encourage you to reach out with questions specific to your situation.

Individual Income Tax Rates and Brackets

The OBBBA makes the lower individual income tax rates and wider brackets permanent, preventing a scheduled increase after 2025. The top individual rate remains at 37%, and marriage penalty relief continues for most brackets.

Electric Vehicles

The OBBBA brought major changes to the federal electric vehicle (EV) tax credits, significantly shortening the eligibility window and adding new compliance requirements. Under the revised rules, the clean vehicle credit of up to $7,500 per new EV is only available for vehicles acquired (via a binding written contract and payment or trade-in) on or before September 30, 2025. If a vehicle is placed in service after that date, the credit may still be claimed as long as you can demonstrate timely acquisition by contract and payment on or before September 30, 2025. “Placed in service” means when you take possession of the vehicle.

The credit structure remains the same: $3,750 is available if the vehicle meets the critical minerals requirement and another $3,750 if it meets the battery component requirement. Eligible vehicles must have a battery capacity of at least 7 kWh, be manufactured by a qualified manufacturer, undergo final assembly in North America, and not exceed the MSRP limits ($80,000 for vans, SUVs, and pickups; $55,000 for other vehicles).

The OBBBA also terminates the used clean vehicle credit (up to $4,000 for eligible vehicles under $25,000) and the commercial clean vehicle credit (up to $7,500 for vehicles under 14,000 pounds or $40,000 for heavier vehicles) for vehicles acquired after September 30, 2025. While the technical rules for critical minerals and battery components remain unchanged, the OBBBA emphasizes the importance of acquisition timing and requires that dealers be registered with the IRS at the time of sale and provide a time-of-sale report.

There are also income limitations: Modified adjusted gross income for the year the vehicle is placed in service cannot exceed $300,000 for married couples, $225,000 for heads of household, or $150,000 for single filers. The income limits for used EVs are half of those amounts. This credit is nonrefundable and cannot be carried forward, so you must have a federal tax liability in the year of purchase to benefit from it.

Residential Clean Energy and Energy Efficient Home Improvement Credit

For 2025, homeowners have two major federal tax incentives for energy-related home improvements, both of which expire on December 31, 2025. The Energy Efficient Home Improvement Credit (IRC Sec. 25C) provides a 30% nonrefundable credit for qualifying upgrades to your U.S. principal residence, such as ENERGY STAR exterior doors (up to $250 per door, $500 annual maximum), windows and skylights (up to $600 annual limit), insulation, air-sealing, and certain HVAC equipment, water heaters, and heat pumps (up to $600 per item, with a separate $2,000 cap for specified high-efficiency equipment like heat pumps or biomass stoves/boilers). The annual aggregate limit is $1,200 for most improvements, plus up to $2,000 for the specified high-efficiency equipment (potentially $3,200 total in 2025). Labor costs are eligible for residential energy property, but not for building envelope components. The credit is only available for improvements placed in service by December 31, 2025, cannot be carried forward, and is nonrefundable (you must have sufficient tax liability to use it).

The Residential Clean Energy Credit (IRC Sec. 25D) offers a 30% nonrefundable credit for eligible expenditures on solar panels, solar water heaters, geothermal heat pumps, small wind turbines, battery storage (with a capacity of at least 3 kWh), and fuel cell property (limited to $500 per 0.5 kW of capacity). This credit applies to both existing and new homes, including second homes, though fuel cell property must be installed in a principal residence. There is no overall annual cap (except for fuel cell property), and any unused credit may be carried forward to future tax years. The credit applies to qualified expenditures made by December 31, 2025, and is nonrefundable, usable only to offset regular tax or AMT.

Homeowners considering energy improvements should act promptly to take advantage of these incentives before they expire, ensure the equipment qualifies, keep proper documentation, and coordinate installation timing to meet the deadlines.

Child Tax Credit

The OBBBA, makes significant and permanent updates to the Child Tax Credit beginning with the 2025 tax year. The maximum credit increases to $2,200 per qualifying child and is now indexed annually for inflation. The refundable portion (the Additional Child Tax Credit) rises to $1,700 per child for 2025 and will also adjust for inflation, with eligibility continuing to phase in at 15% of earned income above $2,500. The Act permanently sets the income phase-out thresholds at $400,000 of MAGI for married couples filing jointly and $200,000 for single and head-of-household filers.

Itemized Deductions:

• Charitable contributions:
  • To maximize the tax impact of your charitable contributions, consider accelerating your planned giving into 2025 and “bunching” multiple years of donations into this year to take full advantage of the current, more favorable deduction rules. Beginning in 2026, the One Big Beautiful Bill Act introduces several significant changes, including a new 0.5% of AGI floor for itemized charitable deductions, meaning only the portion of your contributions that exceeds 0.5% of your adjusted gross income will be deductible. While the 60% AGI limit for cash gifts to public charities is now permanent, non-itemizers will be limited to an above-the-line deduction of $1,000 ($2,000 for joint filers) for cash gifts starting in 2026. Lastly, beginning in 2026, the OBBBA also caps the federal tax benefit of itemized deductions, including charitable contributions, to 35%, even for taxpayers in the 37% top marginal bracket. Given these upcoming limitations, making larger or bunched gifts before December 31, 2025, ensuring all contributions are properly documented, and reviewing your overall giving strategy this year can help you preserve a greater tax benefit. Acting before year-end allows you to maximize deductions under current law and avoid the more restrictive rules that take effect in 2026.
• State and Local Tax (SALT):
  • For 2025, the federal deduction for state and local taxes (SALT) is temporarily increased to $40,000 ($20,000 if married filing separately), but this benefit is subject to a significant phaseout for higher-income taxpayers, specifically, those with modified adjusted gross income (MAGI) over $500,000 ($250,000 if MFS), indexed upward for inflation. For taxpayers with MAGI above these thresholds, the SALT deduction cap is reduced by 30% of the excess MAGI, but not below $10,000, meaning that business owners with MAGI over $600,000 ($300,000 if MFS) will generally be limited to a $10,000 SALT deduction, similar to the pre-2025 rules. In this context, the Pass-Through Entity Tax (PTET) election remains a critical planning tool. By electing to pay state income tax at the entity level, partnerships, S corporations, and LLCs taxed as partnerships or S corporations can deduct these taxes in full at the entity level for federal tax purposes, thereby reducing the amount of pass-through income reported to owners and effectively bypassing the individual SALT deduction limitation. This strategy is especially advantageous for high-income owners subject to the phaseout, as it allows for a federal deduction that would otherwise be lost at the individual level. When considering a PTET election, it is important to review the specific state’s rules regarding eligibility, the mechanics of the election, and the treatment of nonresident owners, as well as the impact on state tax credits and capital accounts. Additionally, owners should coordinate the timing of PTET payments to ensure deductibility in the desired tax year and evaluate whether the election aligns with their overall tax and cash flow objectives. As the SALT cap is scheduled to revert to $10,000 in 2030, and state PTET regimes may change, ongoing monitoring and proactive planning are essential.
• Pease Limitation Replacement (Effective 2026):
  • Starting in 2026, the old Pease limitation on itemized deductions is permanently repealed and replaced with a new rule that reduces the value of itemized deductions for high-income taxpayers. If your taxable income (before itemized deductions) exceeds the threshold for the 37% tax bracket, your total allowable itemized deductions will be reduced by 2/37 of the lesser of (a) your total itemized deductions or (b) the amount by which your taxable income exceeds the 37% bracket threshold. This effectively limits the maximum federal tax benefit of itemized deductions to 35% for income taxed at the top rate, rather than the full 37%. Unlike the former Pease rule, which could phase out up to 80% of deductions and excluded certain categories (such as medical expenses and investment interest), the new limitation applies uniformly to all itemized deductions, including charitable contributions, state and local taxes (subject to the SALT cap), and mortgage interest. The Code Sec. 199A qualified business income deduction is not affected. For most taxpayers, this change will only impact those with income above the 37% bracket threshold, but for those affected, the reduction is automatic and proportional across all deductions. To maximize your tax benefit, consider bunching deductions into years when your income is below the threshold, or timing large charitable gifts and deductible expenses to years when the limitation will not apply. This new rule makes tax planning around the timing and amount of itemized deductions even more important for high-income individuals. 

Educator Expenses

Eligible educators can deduct up to $300 for 2025 expenses paid or incurred relating to books, supplies (other than nonathletic supplies for health and physical education courses), computer equipment, and any other equipment/supplementary materials used in the classroom.

Deduction for Overtime

A significant new opportunity for employees is the temporary federal deduction for overtime pay, effective for tax years 2025 through 2028. This above-the-line deduction, available even if you do not itemize, allows individuals to claim up to $12,500 per year ($25,000 for joint filers) of the “premium” portion of overtime pay required under the Fair Labor Standards Act (FLSA)—specifically, the extra 50% paid for hours worked over 40 in a week, not the full time-and-a-half amount. Importantly, only overtime pay that is required by the FLSA qualifies; overtime paid solely due to state law, employer policy, or collective bargaining agreements does not. This is especially relevant in states like Pennsylvania, where most overtime rules mirror the FLSA, but any overtime paid outside of FLSA requirements (such as daily overtime or for exempt employees) is not eligible for the deduction. The $25,000 joint limit does not require both spouses to work or have overtime income; it is simply a cap on the total deduction for the joint return. The deduction is subject to income phaseouts: it is reduced by $100 for every $1,000 of modified adjusted gross income above $150,000 (single) or $300,000 (joint). For more detailed information about the new overtime and tip deduction rules, please visit our article here.

Deduction for Tips

A new federal deduction for tips, effective for tax years 2025 through 2028, offers a significant benefit to employees in occupations where tipping is customary. Under this provision, individuals may deduct up to $25,000 per year of qualified tips received, subject to a phaseout of $100 for every $1,000 of modified adjusted gross income above $150,000 (single) or $300,000 (joint). To qualify, the taxpayer must work in an occupation that the IRS identifies as “customarily and regularly tipped” as of December 31, 2024, and the IRS has published a list of eligible occupations. Both employees (W-2 recipients) and self-employed individuals (reporting on 1099-NEC, 1099-K, or 1099-MISC) may claim the deduction, provided the tips are voluntary, customer-determined, and not mandatory service charges or negotiated payments. The deduction is not available to individuals working in specified service trades or businesses (SSTBs) as defined under Code Sec. 199A(d)(2), nor to highly compensated individuals, and married taxpayers must file jointly to claim the deduction. A valid Social Security Number is required, and the deduction is available to both itemizers and non-itemizers. For more detailed information about the new overtime and tip deduction rules, please visit our article here. 

Standard Deduction and Personal Exemptions 

For 2025, the standard deduction amount has been increased for all filers.  Single or Married Filing Separately $15,750, Married Filing Jointly or Qualifying Surviving Spouse $31,500, Head of Household $23,625. Under the OBBBA, seniors and blind taxpayers receive expanded standard deduction benefits beginning in 2025. In addition to the regular age 65 or blindness add-on ($1,600 per qualifying individual for married filers or $2,000 for single and head-of-household filers), the Act introduces a temporary extra deduction of $6,000 per eligible individual through 2028. This means a qualifying married couple can receive up to an additional $12,000. The temporary deduction begins to phase out for taxpayers with modified adjusted gross income above $75,000 for single filers and $150,000 for joint filers. 

Car Loan Interest

The new car loan interest deduction, available for tax years 2025 through 2028, is an above-the-line deduction—reducing taxable income regardless of whether you itemize deductions. Taxpayers may deduct up to $10,000 per year in interest paid on a qualifying auto loan. To qualify, the loan must be originated after December 31, 2024, used to purchase a new vehicle for which the original use begins with the taxpayer, and secured by a first lien on the vehicle. Used vehicles and lease payments do not qualify. The vehicle must be for personal use (not business or commercial), be a car, SUV, pickup, van, minivan, or motorcycle with a gross vehicle weight rating under 14,000 pounds and must undergo final assembly in the United States. Taxpayers can confirm U.S. final assembly by checking the vehicle’s window label at purchase or by using the NHTSA VIN Decoder, which identifies the plant of manufacture. The deduction phases out for taxpayers with modified adjusted gross income (MAGI) above $100,000 for single filers or $200,000 for joint filers, reducing by $200 for every $1,000 (or part thereof) above those thresholds. If a qualifying vehicle loan is later refinanced, interest on the refinanced balance generally remains eligible.

To claim the deduction, taxpayers must report the vehicle identification number (VIN) on their return for each year they deduct interest. Lenders or other recipients of qualified interest are required to file information returns with the IRS and provide annual statements to borrowers reporting total interest paid (similar to Form 1098 for mortgage interest). For 2025, the IRS will offer transition relief as lenders update their reporting systems. Taxpayers should retain loan documents, verify U.S. final assembly at purchase, and expect to receive an annual interest statement from their lender to substantiate the deduction. 

401(k) and IRA Limit Increases

The contribution limit for employees who participate in 401(k), 403(b) and most 457 plans has increased to $23,500 for 2025.  The limit on annual contributions to an IRA remains at $7,000 for 2025.  The catch-up contribution limit for employees aged 50 and over who participate in qualified plans remains at $7,500 for 2025, except for employees aged 60, 61, 62, and 63 are able to contribute a catch-up contribution up to $11,250 with a change made under SECURE 2.0, and the catch-up limit on IRA contributions remains at $1,000 for 2025. Another important SECURE 2.0 Act provision requires that, beginning in 2025, catch-up contributions to 401(k), 403(b), and 457(b) plans made by participants whose prior-year wages exceeded $145,000 (indexed for inflation) must be made on a Roth (after-tax) basis. However, the IRS has granted a transition period, so mandatory Roth treatment for these catch-up contributions will not be enforced until 2026. These changes expand opportunities for retirement savings, especially for those nearing retirement, and may require both plan sponsors and participants to review their contribution strategies and plan features before year-end to maximize tax benefits and ensure compliance with the new rules.

Required Minimum Distributions (RMDs)

Required minimum distributions (RMDs) are the minimum amounts you must withdraw annually from your retirement accounts, such as 401(k)s and IRAs, once you reach a certain age. For 2025, the SECURE 2.0 Act requires that RMDs begin by April 1 of the year following the year you turn 73 (if you were born between 1951 and 1959) or age 75 (if born in 1960 or later). If you turned 73 in 2025, your first RMD must be taken by April 1, 2026, with subsequent RMDs due by December 31 each year. Roth IRAs are not subject to RMDs during the account owner’s lifetime, but beneficiaries must follow post-death RMD rules, generally requiring full distribution within 10 years unless the beneficiary is an eligible designated beneficiary (such as a spouse, minor child, or disabled individual). The rules for inherited IRAs remain complex and depend on several factors, including the type of account, the original owner’s age and date of death, and the beneficiary’s relationship to the decedent. For 2025, the qualified charitable distribution (QCD) limit has increased to $108,000 per individual IRA owner. If you are age 70½ or older, you may make a QCD directly from your IRA to a qualified charity; this amount counts toward your RMD for the year but is excluded from taxable income. Planning ahead for RMDs is important, especially for those taking their first distribution, and QCDs can be a valuable strategy for both meeting RMD requirements and supporting charitable causes.

Beware of Fraudulent Activity

Data security is important to our firm, and we make sure to take it seriously.  We hope you do as well, and want to make you aware of the fraudulent activity that can put your data security at risk.  Tax identity theft remains a significant concern and fraudsters are continuously refining and improving upon their techniques.  Beware of the following:

• Receiving a notice or letter from the IRS regarding a tax return, tax bill or income that doesn’t apply to you.
• Getting an unsolicited email or another form of communication asking for your bank account number, other financial details, or personal information.
• Receiving a robocall, email, or text message insisting you must call back and settle your tax bill immediately.
• Third parties advising you to claim the Employee Retention Credit (ERC) when you may not actually qualify for the credit.

Make sure you are continuously taking steps to keep your personal financial information safe.  If you have questions or concerns about your data security, let us know.

Digital Assets

Digital assets remain an important part of the financial landscape and continue to be treated as property for tax purposes. This category includes virtual currencies/cryptocurrencies, stablecoins, and non-fungible tokens (NFTs). Any sale, exchange, or use of digital assets as payment for goods or services is a taxable event and must be reported on your tax return. Beginning in 2025, brokers and digital asset trading platforms are required to report sales or dispositions of digital assets on the new Form 1099-DA (not Form 1099-B). For 2025, only gross proceeds will be reported; cost basis reporting will begin in 2026. There are de minimis thresholds for certain stablecoin and NFT transactions, but most sales through brokers will be reported. The requirement to report digital asset receipts on Form 8300 (for transactions over $10,000) is postponed until further IRS guidance is issued. Taxpayers must continue to answer the digital asset question on their tax return, indicating whether they received, sold, exchanged, gifted, or otherwise disposed of a digital asset or financial interest in a digital asset during 2025. Backup withholding and penalties for Form 1099-DA are waived for 2025 if brokers make a good faith effort to comply. As always, it is important to keep detailed records of all digital asset transactions to ensure accurate tax reporting. 

Third-Party Settlement Organizations Include Many Popular Payment Apps and Online Marketplaces

For 2025, Form 1099-K may be issued to anyone using payment apps or online marketplaces to accept payments for selling goods or providing services. This includes individuals with side businesses, small business owners, crafters, and other sole proprietors. It can also include casual sellers who sell personal items, such as clothing, furniture, or household goods, even if they sold the items for less than they originally paid. However, for 2025, a Form 1099-K from third-party settlement organizations (like PayPal, Venmo, eBay, or Etsy) will only be issued if you receive more than $20,000 in payments and have more than 200 transactions during the year. For payment card transactions (such as credit or debit cards), there is no minimum threshold, any amount must be reported. The lower $600 threshold from prior law changes does not apply for 2025.

Pennsylvania Property Tax/Rent Rebate Program

For 2025, the maximum standard rebate is $1,000, and the income cap for both renters and homeowners is $46,520 a year.  The program is applicable to Pennsylvanians age 65 and older, widows and widowers age 50 and older, and people with disabilities age 18 and older.

Beneficial Ownership Information Reports - Nationwide Injunction Still in Effect

As of 2025, a nationwide injunction remains in place preventing the federal government from enforcing the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements. This means that, for now, businesses are not required to file BOI reports or comply with the CTA until the legal proceedings are resolved. Previously, most corporations, LLCs, and similar entities with fewer than 20 employees and less than $5 million in annual revenue were required to file, with deadlines based on their formation date. However, due to the ongoing injunction, enforcement is suspended, and no penalties will be assessed at this time. We recommend monitoring for further legal developments and consulting your legal advisor for the latest guidance, as this situation may change. As tax preparers, we are not able to assist with BOI filings, as these often involve legal considerations.

U.S. Department of Labor’s (DOL) Overtime Rule – Status for 2025

The U.S. Department of Labor’s (DOL) 2024 Rule proposed raising the minimum salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA) from $35,568 to $43,888 effective July 1, 2024, and to $58,656 starting January 1, 2025, with automatic triennial adjustments beginning July 1, 2027. These changes were expected to make more employees eligible for overtime by classifying them as nonexempt. However, a recent federal court decision has invalidated the DOL’s 2024 Rule to increase the salary thresholds. As a result, the previous salary threshold ($35,568) remains in effect for 2025 unless further legal developments occur. Employers should monitor for updates and consult with legal counsel regarding compliance. 

IRS Transition to Electronic Refunds and Payments

Beginning September 30, 2025, the IRS will phase out paper checks for individual tax refunds, requiring most refunds to be issued electronically via direct deposit, prepaid debit card, or digital wallet. This change is part of a broader federal initiative to modernize payment systems, improve security, and increase efficiency. While limited exceptions will be available for individuals without access to electronic payment systems or in cases of hardship, the IRS strongly encourages all taxpayers to provide direct deposit information when filing their returns. For those without a bank account, options such as prepaid debit cards or digital wallets are available. Although paper checks are still currently accepted for payments to the IRS, a transition to mandatory electronic payments is expected for tax year 2025 filings, beginning in January 2026. We recommend setting up direct deposit for refunds and using electronic payment methods, such as IRS Direct Pay, debit/credit cards, or the Electronic Federal Tax Payment System (EFTPS), for any tax payments to ensure timely and secure processing.

Wagering Loss Deduction Limitation (Effective 2026)

Beginning in 2026, a significant change will affect taxpayers who engage in gambling activities. Under the new law, the deduction for gambling (wagering) losses will be limited to 90% of the total gambling losses incurred during the year, and this 90% amount is then further limited to the amount of gambling winnings reported for the year. This means that even if your gambling losses equal or exceed your winnings, you will only be able to deduct up to 90% of those losses, and the remaining 10% will not be deductible. For example, if you have $15,000 in gambling winnings and $15,000 in losses, you may only deduct $13,500 (90% of $15,000), resulting in $1,500 of taxable income, even though you have not realized a net gain. This change applies to both professional and amateur gamblers, and includes not only the cost of wagers but also any allowable business expenses related to gambling. Taxpayers who regularly incur net gambling losses will no longer be able to fully offset their winnings, potentially increasing their taxable income and tax liability. Losses in excess of the 90% threshold will be permanently nondeductible and cannot be carried forward.

Trump Accounts (Tax-Deferred Investment Accounts for Children) 

A significant new opportunity for families with children is the introduction of “Trump Accounts”—tax-deferred investment accounts designed for children under age 18. To be eligible, the child must be a U.S. citizen with a valid Social Security number and must not have reached age 18 by the end of the calendar year in which the account is established. Parents, relatives, employers, and certain tax-exempt entities may contribute up to $5,000 per year in after-tax dollars to each child’s account (indexed for inflation after 2027), with an additional employer contribution limit of $2,500 per year. Notably, for children born between January 1, 2025, and December 31, 2028, the federal government will make a one-time $1,000 contribution to each eligible account, which does not count toward the annual contribution limit. Funds in Trump Accounts must be invested in low-fee mutual funds or exchange-traded funds that track a broad U.S. equity index, and earnings grow tax-deferred. Distributions are generally not permitted until the year the child turns 18, at which point the account transitions to a traditional IRA and becomes subject to standard IRA rules. Trump Accounts offer a unique planning opportunity to accumulate long-term, tax-advantaged savings for children, leveraging both family and government contributions, and can be a powerful tool for building a child’s financial foundation while maximizing tax deferral on investment growth. 

Additional Tax and Retirement Planning Considerations

At least once a year, we recommend that you review your retirement situation.  You should make the most of tax-advantaged retirement saving options, such as traditional IRAs, Roth IRAs and company retirement plans.  Taking advantage of health savings accounts (HSAs) can also help you reduce your taxes and save for your future.

The following are additional tax and financial planning items to discuss with us:

• Major changes in your life (marriages or divorces, births or deaths in the family, job or employment changes including retirement, new business ventures and significant expenditures such as real estate purchases, college tuition payments, etc.) that could have a tax effect.
• Tax benefits related to using capital losses to offset realized gains –– and move any gains to the lowest tax brackets, if possible.
• Estate and gift tax planning: The annual gift tax exclusion is $19,000 per donee ($38,000 for married couples) in 2025. The federal estate and gift tax exemption is $13,990,000 per individual for 2025, increasing to $15,000,000 in 2026 (indexed for inflation thereafter).
  • Under a special rule relating to Section 529 plans, you can contribute an amount equal to five years' worth of annual gift tax exclusions ($95,000 per beneficiary, $190,000 if gift-splitting with a spouse), but this requires filing a gift tax return. You cannot make additional contributions for the next five years and may or may not owe taxes, depending on your situation.
• Section 529 plans to help save for education and potentially receive income tax benefits.  Section 529 plans can also be used to pay up to $10,000 of student loans, however, the interest paid using this method cannot be used towards the student loan interest deduction.
• Updates needed to insurance policies or beneficiary designations.
• Tax consequences of converting traditional IRAs to Roth IRAs.
• Potential 0% federal rate on long-term capital gains.  If your taxable income is not greater than $96,700 married filing joint, $64,750 head of household, or $48,350 for all others in 2025, you may want to consider selling appreciated securities held for more than one year.  Until taxable income exceeds the thresholds above, long-term capital gains are taxed at a 0% federal rate.
• Withholding, estimated tax payments, and liquidity needs going forward.  Please note that the last quarterly payments for 2025 are due on January 15, 2026.
• The Secure 2.0 Act continues to allow 529 plan-to-Roth IRA conversions, subject to specific requirements: the Roth IRA must belong to the 529 plan’s beneficiary, the plan must have been open at least 15 years, contributions and their earnings made within the last five years are ineligible, the annual conversion limit is $7,000 (plus $1,000 catch-up if age 50+), and the lifetime maximum is $35,000.

Importance of Year-End Planning

There may be strategies such as deferral or acceleration of income, prepayment or deferral of expenses, etc., that can help you improve your financial position and result in tax savings.

We are here for any questions you may have, including working towards retirement, getting answers to your tax and financial planning questions, or what tax changes might mean for you.  As always, planning ahead can help you minimize your tax bill and position you for greater success with less surprises come 2026.

As legislation continues to evolve, we will contact you to discuss how changes impact your tax and financial plan.

Your 2025 individual tax return is due on April 15, 2026, but we encourage you to get your tax information to us as soon as it becomes available to you.

Sincerely,

McGill, Power, Bell & Associates, LLP