As 2025 winds down, the fourth quarter is an ideal time to review your tax strategy and take advantage of new opportunities. With updated tax laws now in effect, year-end planning can make a meaningful difference in your 2025 tax bill and set you up for success heading into 2026. Here are a few areas to focus on before December 31.
Revisit Your SALT Deduction Strategy
The state and local tax (SALT) deduction limit has increased from $10,000 to $40,000 beginning in 2025, creating a significant opportunity for many taxpayers. If you live in a higher-tax state, this change could translate to meaningful federal savings. Consider whether itemizing your deductions now makes sense, and explore strategies like paying two years of property taxes or grouping multiple years of charitable giving into 2025 to maximize your deduction.
Pass-Through Entity Owners: Review PTET Options
Business owners with S corporations, partnerships, or LLCs should review their state’s pass-through entity tax (PTET) election. PTET allows businesses to pay state income tax at the entity level and deduct those payments federally—up to the new $40,000 cap. Each state has its own process and deadline for making the election, so now is the time to confirm your options.
Donate Appreciated Stock
Instead of donating cash, consider contributing appreciated stock held for more than a year. You can deduct the full fair market value while avoiding capital gains tax on the appreciation. This approach can significantly enhance both your charitable impact and your tax efficiency.
Evaluate Multi-State Property Ownership
If you maintain homes in more than one state, your residency and domicile status could impact your tax liability. Each state has unique residency rules that can affect both income and estate taxes. Review where you’ve spent most of your time, as well as factors such as voter registration, driver’s license, and mailing address, to ensure alignment with your long-term plan.
Need help reviewing your year-end strategy?
Our team at Somich & Associates CPAs can help you identify opportunities to reduce taxes and plan proactively for 2026.