December 2025 Newsletter b

Bonus Depreciation & Other Year End Tax Saving Tools for Businesses

As 2025 draws to a close, business owners have an excellent opportunity to position themselves for meaningful tax savings. The recent legislative changes under the One Big Beautiful Bill Act (OBBBA), combined with long‑standing year‑end planning tools, can create powerful advantages when used strategically. This guide provides a detailed, fact‑based overview of the key tax‑saving options available to businesses and individuals.

🏭 Bonus Depreciation: 100% First Year Deduction Restored for 2025

The OBBBA permanently reinstates 100% first‑year bonus depreciation for eligible assets acquired and placed in service after January 19, 2025. This change reverses the previously scheduled phase‑down — which would have allowed only 40% bonus depreciation in 2025 — and restores the full deduction opportunity immediately.

Eligible assets include:

⚙️ Machinery and equipment used in business operations
💻 Computer hardware, servers, and peripherals
🚗 Certain business‑use vehicles
🧑‍💻 Commercial off‑the‑shelf software
🏢 Qualified Improvement Property (QIP) — interior, non‑structural improvements to nonresidential buildings

Why Bonus Depreciation Matters

Bonus depreciation has several advantages over Section 179 expensing:

No annual dollar limit
No phaseout
Can generate large deductions even for businesses with significant asset purchases
Applies to both new and used property (subject to eligibility rules)

To benefit for the 2025 tax year, the asset must be acquired and placed in service by December 31, 2025 — a critical timing factor for year‑end planning.

⚠️ Excess Business Loss Rule: Critical Limitation for Individuals

While 100% bonus depreciation creates opportunities for substantial year‑end deductions, individual taxpayers who operate businesses directly or through pass‑through entities must be aware of the Excess Business Loss (EBL) rule.

2025 EBL Thresholds

👤 $313,000 — Single filers
👥 $626,000 — Married filing jointly

If total business losses exceed these limits:

The excess becomes an “excess business loss.”
It cannot be deducted in the current year.
It is carried forward as a net operating loss (NOL) to future years.

Practical takeaway:
If a taxpayer purchases large assets and claims 100% bonus depreciation, a substantial portion of the deduction may be deferred to a later year due to the EBL limitation. For high‑income professionals and owners of profitable pass‑through entities, coordinating bonus depreciation with EBL limits is essential.

🧾 Retirement Plans: A Reliable and High Impact Way to Reduce Taxes

Tax‑favored retirement plans remain one of the best ways for business owners to reduce taxable income while building long‑term wealth.

🟦 SEP IRA

A SEP IRA offers flexibility and high contribution limits with minimal administrative burden.

2025 SEP Contribution Limits:

Self‑employed individuals: up to 20% of net self‑employment income
Owner‑employees: up to 25% of W‑2 compensation
Maximum allowed contribution: $70,000

Contributions are tax‑deductible, making SEP IRAs a strong year‑end option for both new and established businesses.

🟩 Other Retirement Plan Options

Depending on the business’s structure and goals, other plans may provide higher contribution limits or strategic advantages:

401(k) and Solo 401(k) Plans

Allow both employer and employee contributions
Strong for self‑employed individuals with variable income

SIMPLE IRAs

Lower administrative complexity
Useful for small businesses with employees

Defined Benefit & Cash Balance Plans

Extremely high contribution potential
Best suited for older business owners with consistent income
Provide large tax deductions paired with long‑term retirement accumulation

5 Smart Year End Tax Strategies for Individuals (2025)

A comprehensive review of your tax situation before December 31 can provide major benefits. Below are five expanded planning strategies for individuals:

📌 1. Use a Bunching Strategy to Maximize Itemized Deductions

If your itemized deductions hover near the standard deduction threshold, you may increase tax savings by timing payments to consolidate deductions in a single year.

Bunching may involve:

Prepaying property taxes (subject to SALT limitations)
Accelerating charitable contributions
Timing medical expenses
Paying mortgage interest within the same tax year

This alternating pattern allows you to itemize one year and take the standard deduction the next, maximizing the value of deductions that would otherwise go unused.

💹 2. Balance Investment Gains and Losses (Tax‑Loss Harvesting)

If you hold investments in taxable accounts, coordinating gains and losses is key:

Benefits include:

Realizing long‑term capital gains (taxed at 15% or 20% for most individuals, plus NIIT for higher‑income taxpayers)
Realizing losses to offset gains
Deducting up to $3,000 of net capital losses against ordinary income
Carrying forward unused losses for future tax years

This strategy can refine your investment portfolio while minimizing tax exposure.

🎁 3. Consider Gifting Appreciated Assets to Relatives

Gifting investments to adult children or family members in lower tax brackets allows them to sell assets at potentially lower capital gains rates, or even 0% in some cases.

When using this strategy:

Be mindful of kiddie tax rules
Track gift tax annual exclusions
Confirm the recipient’s income level and tax bracket

Gifting appreciated assets remains a powerful tool for multigenerational planning and tax efficiency.

❤️ 4. Give Appreciated Securities Instead of Cash

Donating appreciated investments you’ve held over one year offers two benefits:

You avoid capital gains tax
You may deduct the full fair market value if you itemize

If an investment has lost value, consider selling it first and donating the proceeds — enabling both a capital loss deduction and a charitable deduction.

With several deduction changes scheduled for 2026, strategic charitable giving in 2025 may yield even greater benefits.

🙌 5. Use Your IRA for Charitable Gifts (QCDs for Age 70½+)

For individuals 70½ or older, Qualified Charitable Distributions (QCDs) provide a tax‑efficient method of supporting charities directly from an IRA.

Key QCD Advantages (2025):

Donate up to $108,000 directly from your IRA
QCD amounts are excluded from taxable income
Lower adjusted gross income (AGI) can improve eligibility for:
- Medicare premium brackets
- Tax credits
- Income‑based deductions
- Social Security taxation thresholds

QCDs are particularly useful for taxpayers who do not itemize deductions.

Final Thought

Tax planning is never one‑size‑fits‑all. Your income level, business structure, investments, timing, and long‑term goals all influence the best strategies. Whether you are evaluating bonus depreciation opportunities, coordinating investment gains and losses, or maximizing charitable giving, thoughtful year‑end planning can create meaningful tax savings.

For personalized guidance, JTA‑CPA is here to help you develop a tax plan aligned with your 2025 goals — and beyond.