2025 Tax Planning Guide

INDIVIDUALS: Tax Strategies, Compliance & Opportunities

IRS Transition to Electronic Payments

NEW: As of September 30, 2025, the IRS has begun phasing out paper checks for both tax refunds and payments. This change applies to 2025 tax returns filed in 2026 and is part of a broader effort to make transactions faster, safer, and more efficient.

Refunds

Taxpayers will need to provide bank account information (routing and account numbers) to receive refunds via direct deposit, which remains the quickest and preferred method. For those without a bank account, the IRS is developing alternative options, including prepaid debit cards and other secure electronic solutions.

Payments

Although the mandate also covers payments to the IRS, the timeline for requiring electronic payments is expected to be later. In the meantime, taxpayers are encouraged to transition to electronic payment methods now to avoid delays and prepare for the upcoming changes.

What You Can Do Now

• Confirm your banking details (routing and account numbers) before filing your return.
• Start using electronic payment options for estimated taxes and balances due.
• Consider enrolling in EFTPS (Electronic Federal Tax Payment System) early, as setup requires advance verification by mail.

Electronic Payment Options

• IRS Direct Pay – Free, direct from your bank account, no registration required
• EFTPS (Electronic Federal Tax Payment System) – Schedule payments in advance; requires enrollment
• Debit/credit cards – fees apply

Investments

As the year comes to a close, take some time to review your investments and determine which strategies will help you meet your financial goals. Here are a few considerations as you prepare for the year-end:

• Consider harvesting capital losses to offset capital gains. Take the time to review your investment portfolio and consider whether selling losers to offset gains may be an appropriate strategy for you. Capital losses can offset capital gains plus up to $3,000 of other income. And there is no time limit on applying excess capital losses. They may be carried forward to offset future capital gains.
• Be aware of the wash-sale rule. The wash-sale rule indicates that the IRS will not allow a tax loss to be applied if you purchase substantially identical securities within 30 days of a sale. Keep this in mind as you plan your strategies.
• Consider gifting non-cash assets. Giving of non-cash assets can yield significant tax benefits. If you have appreciated stock (or mutual fund shares) that you have held more than a year, and you plan to make significant charitable contributions before year-end, consider keeping your cash and donating the stock instead. You will avoid paying tax on the appreciation but will still be able to deduct the donated property’s full value. However, if the stock is now worth less than when you acquired it, sell the stock, take the loss, and then give the cash to charity. Note: A qualified appraisal is required for donating non-cash assets, such as crypto, when the value of the deduction exceeds $5,000. Also, donating publicly traded securities does not require a qualified appraisal.

Virtual Currency & Digital Assets

The complexity and variety in the virtual currency and digital asset environment continues to evolve. Due to this evolution, we recommend consulting with your Simon Lever advisor to determine the tax impact and reporting requirements if you are participating in either virtual currency or digital asset transactions.

NEW: Beginning with the 2025 tax year, brokers will be required to provide taxpayers with Form 1099-DA to report gross proceeds from the sale, exchange, or other disposition of digital assets through a custodial brokerage. This new reporting requirement applies to transactions occurring on or after January 1, 2025, with the first forms to be issued in early 2026.

As you prepare to consult with your advisor, here are some considerations to keep in mind:

• If you bought, sold, received, or exchanged any financial interest in a virtual currency or digital asset during the year, you may have a tax reporting requirement.
• If you earned income or rewards from gaming, staking, or mining, you may have ordinary income subject to self-employment tax.
• The wash-sale rules mentioned above do not currently apply to virtual currency and digital assets.
• A significant decline in value, even for a bankrupt cryptocurrency, does not equate to a loss deduction unless you sell the cryptocurrency because the property is not considered worthless and could appreciate in the future.

RETIREMENT PLAN & HEALTH SAVINGS ACCOUNT (HSA) CONTRIBUTIONS

Retirement Plan Contributions

NEW: As the year wraps up, it’s a great time to review your retirement contributions and make any adjustments before deadlines. Here’s what to keep in mind:

• IRA Contributions:
  • You can contribute up to $7,000 for 2025.
  • If you’re age 50 or older, you can add $1,000.
  • Deadline: April 15, 2026.
• 401(k) Contributions:
  • You can contribute up to $23,500 for 2025.
  • If you’re age 50 or older, you can add a $7,500 catch-up contribution.
  • For individuals ages 60–63, an enhanced catch-up of $11,500 apply.
  • Deadline: December 31, 2025.
• Important Changes for 2026:
  • High earners (wages over $145,000 in the prior year) must make 401(k) catch-up contributions on a Roth (after-tax) basis starting in 2026.
• Roth IRA Income Limits for 2025:
  • Single filers: $150,000–$165,000 (up from $146,000–$161,000 in 2024)
  • Joint filers: $236,000–$246,000 (up from $230,000–$240,000 in 2024)

Health Savings Account (HSA) Contributions

NEW: Now is an ideal time to review and optimize your HSA contributions for maximum tax savings. If you are enrolled in a high-deductible health plan, you may be eligible to make tax-deductible contributions to an HSA of up to $8,550 for family coverage or $4,300 for individual coverage. An additional $1,000 is permitted if you are 55 or older by the end of the year.

Education

Education funding continues to be a focus, and there are key tactics to consider as you plan for education costs.

529 Plans 

• The use of 529 plans is a common way to help fund not only college costs, but also K–12 education expenses and college loan debt. The college loan debt repayment is limited to a lifetime limit of $10,000 per beneficiary.
• While contributions to 529 plans are not tax-deductible for federal income tax purposes, earnings grow tax-free and — if used to pay for the beneficiary’s college expenses — are never taxed.
• Contributions to a 529 plan are deductible for Pennsylvania tax purposes, resulting in a 3.07% tax deduction. Maximum PA tax-deductible contributions permitted to 529 plans equal $19,000 per individual for 2025, per beneficiary.

Note: Up to $2,500 of student loan interest paid in 2025 may be deductible, subject to modified adjusted gross income thresholds.

Real Estate Investments

If you are invested in residential or commercial real estate and spend a significant portion of your time in real estate related activities, please contact your Simon Lever advisor to learn about potential tax saving opportunities such as real estate professional status, short-term rental treatment, and the impact of depreciation.

Certain short-term rentals with an average guest stay of 7 days or less may not be not subject to the passive activity loss limitations and may allow rental losses to offset non-passive income, provided the taxpayer meets the requirements for material participation. Additionally, if you rent your personal residence for 14 days or fewer during the year, the rental income may be tax-free. Consult with your Simon Lever advisor to ensure you are maximizing the tax opportunities associated with your rental properties. 

PA’s EITC and OSTC Programs

Pennsylvania’s Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs provide significant state tax credits for contributions to approved educational organizations. Due to limited availability and competitive demand, timely application is important. Contact your Simon Lever advisor to explore whether these credits may be beneficial to you.

ITEMIZED DEDUCTIONS

Did you know that itemizing deductions can provide additional tax benefits? The IRS provides a standard deduction ($31,500 for married filing jointly or $15,750 for single filers in 2025). However, if you itemize your deductions, you have increased flexibility in managing your income. Itemized deductions include:

State and Local Tax (SALT) Deduction

NEW: The One Big Beautiful Bill Act significantly increased the state and local tax (SALT) deduction cap from $10,000 to $40,000 for tax years 2025 through 2029.

• Important Limitation: The $40,000 cap phases out for taxpayers with modified AGI above $500,000 ($250,000 for married filing separately). The cap increases by 1% annually through 2029, then reverts to $10,000 in 2030.

Home Mortgage Interest

Continue to track your mortgage interest for potential deduction.

Charitable Contributions

NEW: For very charitably inclined taxpayers, 2025 is a strategic year. Current rules may be more favorable than 2026, with no AGI floor and full tax benefit for high earners. Consider front-loading charitable giving this year and bunching your charitable contributions into one year to get a larger itemized deduction. This strategy works well when combined with a donor-advised fund. Starting in 2026, non-itemizers can deduct up to $1,000 ($2,000 for joint filers) for cash charitable contributions. New limitations for high earners in 2026 include:

• Starting at the beginning of 2026, taxpayers in the top tax bracket (37%) will see their itemized deductions limited to a tax benefit equal to 35% of their taxable income.
• Taxpayers who itemize and claim charitable contributions will be subject to a new 0.5% AGI floor which means only donations exceeding 0.5% of your AGI will be deductible.
• Action item for high net worth individuals: consider accelerating planned 2026 contributions into 2025 to maximize deductions under current, more favorable rules.

Additional Tax Deductions for 2025: One Big Beautiful Bill Act

Several new and enhanced deductions were introduced under the One Big Beautiful Bill Act for 2025 and may impact your tax planning:

NEW: Additional Senior Deduction

• Taxpayers age 65 and older can claim an additional $6,000 deduction ($12,000 for married couples where both qualify), in addition to the existing extra standard deduction.
• This deduction is available to both itemizing and non-itemizing taxpayers. This deduction phases out for modified adjusted gross income over $75,000 ($150,000 for joint filers).

NEW: No Tax on Tips

• Deduction of up to $25,000 per return, regardless of filing status, for qualifying tip income.
• Phases out for modified adjusted gross income over $150,000 ($300,000 for joint filers).
• Not available for self-employed individuals, owners of a business who are also employees of the business, or employees working for specified service businesses.

NEW: No Tax on Overtime

• Deduction of up to $12,500 per taxpayer ($25,000 for joint filers) for qualifying overtime compensation.
• Phases out for modified adjusted gross income over $150,000 ($300,000 for joint filers)
• The deduction applies only to overtime premium pay required under Section 7 of the Fair Labor Standards Act (FLSA). This means it only applies to time-and-a-half for hours worked beyond 40 in a workweek & only the over-time portion counts (the extra .5x, not the full 1.5x rate)

NEW: Vehicle Loan Interest Deduction

• Deduction for interest paid on loans for new vehicles with final assembly in the United States.
• Maximum deduction up to $10,000 with phaseout for modified adjusted gross income over $100,000 ($200,000 for joint filers).
• Applies only to vehicles purchased for personal use with gross vehicle weight rating less than 14,000 pounds.

Enhanced Child Tax Credit

• The child tax credit increased to $2,200 per qualifying child for 2025 (up from $2,000).

Energy Efficient Home Improvement Credits

• ACT NOW – Credits expire December 31, 2025
• 2025 is your last opportunity to claim these federal tax credits. The One Big Beautiful Bill Act ended the energy tax credits effective December 31, 2025.

Residential Clean Energy Credit (30%)

• Solar panels, solar water heaters, geothermal heat pumps, wind turbines, battery storage, and fuel cells
• No annual dollar limit
• Includes installation costs

Energy Efficient Home Improvement Credit (30%)

• Insulation, boilers, central air conditioning, water heaters, heat pumps, exterior doors, and windows meeting energy efficiency standards
• Annual limit: Up to $3,200 total
  • $1,200 for most improvements (doors, windows, insulation, HVAC). The following sub-limits apply:
    • Doors – $250 per door, $500 total
    • Windows – $600 in total
    • Central air conditioners, water heaters, boilers, etc. – $600 per item
  • $2,000 for heat pumps, heat pump water heaters, and biomass stoves/boilers
• Installation costs included only for heat pumps, water heaters and biomass equipment
• Important Deadline: Expenses must be incurred and equipment must be placed in service (installed) by December 31, 2025.
• Note: The electric vehicle tax credit already expired on September 30, 2025.

____________________________________________________________________________________________________

TAX STRATEGIES & OPPORTUNITIES FOR BUSINESSES

TIPPED EMPLOYEES OR OVERTIME WORKERS

NEW: While the “No Tax on Tips” and “No Tax on Overtime” provisions are effective immediately (retroactive to January 1, 2025), the IRS announced that Form W-2 and other payroll forms will remain unchanged for 2025. Updated forms will not be available until 2026.

Employers are encouraged to provide employees with separate accounting and information regarding overtime and/or tips compensation so employees can determine if they qualify for the deduction. This information may be reported through:

• Box 14 of the W-2,
• Online portal, or
• Additional written statements furnished to the employee.

There is no penalty for employers who do not provide this information on 2025 filings, however, payroll processes will need to updated for 2026 compliance.

Businesses are encouraged to act now to ensure compliance.  Contact your Simon Lever advisor if you have questions about the new reporting requirements.

IRS Transition to Electronic Payments

NEW: Beginning September 30, 2025, the IRS is phasing out paper checks for both refunds and payments.

Refunds

Business will need to provide bank account details for refunds

Payments

Businesses still paying tax obligations by paper check must transition to electronic methods

Electronic Payment Options

• IRS Direct Pay – Free, direct from your bank account, no registration required
• EFTPS (Electronic Federal Tax Payment System) – Schedule payments in advance; requires enrollment
• IRS Business Tax Account
• Same-Day Wire Payment (Federal Tax Collection Service – FTCS): you must arrange this with your financial institution in advance, and they may charge a fee
• Debit/credit cards (fees apply)

QUALIFIED BUSINESS INCOME (QBI) DEDUCTION

The 20% qualified business income (QBI) deduction for pass-through entities is now a permanent provision, providing long-term planning certainty for business owners. Subject to applicable limitations and phase-outs, the deduction is calculated as the lesser of 20% of qualified business income or 20% of taxable income (before the QBI deduction and reduced by net capital gain). This deduction is available whether or not you itemize deductions.

NEW: Effective for tax years beginning after December 31, 2025, a $400 minimum deduction applies for taxpayers with at least $1,000 in aggregate qualified business income from active trades or businesses in which they materially participate.

The deduction is subject to income-based phase-outs for specified service trades or businesses (SSTBs) and other limitations based on W-2 wages and unadjusted basis of qualified property.

Equipment & Asset Purchases

If you have or are considering the purchase of equipment and assets for your business, take the following strategies and updates into consideration. We recommend consulting your advisor on the best strategies for purchases for your business.

Current tax law provides options for accelerating depreciation:

Bonus depreciation 

NEW: The One Big Beautiful Bill Act (OBBBA) permanently restores 100% bonus depreciation for most qualified property acquired and placed in service after January 19, 2025. This allows businesses to immediately deduct the full cost of eligible assets in the year they are placed in service, with no dollar limit (subject to certain restrictions).

To qualify for 100% bonus depreciation, both the acquisition and the in-service date must be after January 19, 2025. If the property is acquired under a binding written contract entered into before January 20, 2025, it remains subject to the prior phase-down rates (e.g., 40% for property placed in service in 2025). Special rules apply to self-constructed property and certain long production period assets.

Qualified Production Property 

NEW: A new 100% first-year depreciation allowance is available for certain nonresidential real property used in qualified production activities.

• What Qualifies:
  • Nonresidential real property integral to manufacturing, production, or refining of tangible personal property in the United States
  • Includes manufacturing facilities, agricultural production, and chemical refining operations
• Timing Requirements:
  • New construction: Must begin after January 19, 2025, and before January 1, 2029
  • Property must be placed in service: after July 4, 2025 and before January 1, 2031
  • Existing property: Might qualify if not used for manufacturing between January 1, 2021 and May 12, 2025. The property must not have been used by the taxpayer prior to acquisition, and it must not be acquired from a related party or in a carryover basis transaction. Check with your advisor for more details if this potentially applies to your situation since the requirements are nuanced.
• What Doesn’t Qualify:
  • Office space, administrative areas, sales, or research facilities
  • Property you lease to another party
  • Property acquired from related parties
• Important Notes:
  • 10-year recapture applies if you stop using the property for qualified production
  • Original use must begin with you (generally means new construction)
  • Land is not eligible
  • Additional guidance from treasury is needed for certain requirements, definitions and recapture information
  • Property acquired under a binding written contract before January 20, 2025 is not eligible

Contact your Simon Lever advisor to determine if your business qualifies.

Section 179 Deduction

NEW: Section 179 deduction can be utilized to deduct 100% of the cost of eligible additions up to $2,500,000. There is a phase-out of this type of deduction when eligible additions exceed $4,000,000, with complete phase-out at $6,500,000. There are other limitations that could reduce the maximum amount that can be claimed.

Note: State conformity may vary.

Important considerations:

• Businesses can consider accelerating purchases planned for the first quarter of 2026 into the 2025 calendar year to accelerate tax deductions.
• Be aware that there are certain depreciation limitations on vehicles and property that is partially used personally.
• For 100% bonus depreciation, including Qualified Production Property, the acquisition date is established when a written binding contract is entered into, regardless of the actual delivery date or payment timing; must be after January 19, 2025.
• To be eligible for depreciation, assets must be received and available for use, not just ordered.

Qualified Improvement Property

If you completed commercial property improvements, be sure to review them with your advisor to determine potential tax benefits.

• Eligible interior renovations to a commercial property may qualify for a 15-year depreciable life or accelerated depreciation in 2025.
• Excludes elevators, escalators, building enlargement, and building interior structural improvements.

Prepaying Expenses

Consider using prepaid accounts for eligible expenses. Certain expenses are eligible for a tax deduction when prepaid in the current year with the benefit of the expense occurring in the following year.

• Some eligible expenses include insurance, property taxes, and supplies.
• Note: Prepaid rent paid to a related party is subject to special timing rules that generally prevent the immediate deduction of the prepaid amount. Other limitations may also apply.

Timing of Year-end Bonuses

• Cash basis taxpayers should consider the benefit of paying bonuses before the end of the year whereas accrual basis taxpayers have until March 16, 2026 to pay bonuses and take the deduction for tax purposes in 2025.

Damaged and/or Obsolete Items

• Don’t forget to evaluate inventory and identify damaged and/or obsolete items.
• The carrying cost of any such items of inventory may be written down to the lesser of their probable selling price (net of selling expenses) or cost provided the substantiation and documentation requirements are met.
• Physically disposing of items is an option if have they have no value.

Cash Basis of Accounting

Consider your accounting method and if a change would benefit your business.

• Under the cash basis of accounting, income and expenses are reported only when cash is received or disbursed. Making the change from accrual basis to cash basis can result in a significant one-time deferral of income.
• Not all businesses are eligible to report on the cash basis.

Cost Segregation for Real Property

Owners of real estate can gain tremendous tax benefits by using a popular asset-depreciation technique called cost segregation. Using this method, a real estate holding can be determined to consist not only of land and buildings but also tangible personal property and land improvements.

• Tax savings can come from accelerated depreciation deductions available to personal property and land improvements.
• With 100% bonus depreciation permanently restored, cost segregation studies have become even more valuable. Every dollar reclassified into short-life property can be fully deducted in the first year for property placed in service after January 19, 2025.
• Care must be taken to adequately document (typically performed by an engineer or cost segregation study specialist) the portion of the building that qualifies for accelerated depreciation.
• Consult with your advisor to understand if this would be of benefit to you.

Meals & Entertainment Expenses

Take the time to review expensed meals.

• Meals offered at company-wide events, such as picnics or holiday parties, are 100% deductible
  • NEW: Important Update: Meals provided on-site for the employer’s convenience, such as snacks, coffee, and cafeteria meals, will become 100% nondeductible starting at the beginning of 2026 (with limited exceptions).
• Most other business meals are 50% deductible for tax purposes.
• Entertainment continues to be non-deductible.

Research & Development (R&D) Expenditures 

The One Big Beautiful Bill Act restores immediate expensing for domestic R&D costs.

Starting in tax years beginning after December 31, 2024, businesses can now immediately deduct domestic research and experimental expenditures in the year they are incurred, rather than capitalizing and amortizing them over 5 years as was required from 2022-2024.

NEW: Capitalized Domestic R&D

• Can be expensed in 2025, or
• Can be expensed pro-rata between 2025 and 2026, or
• Continue to amortize over the remaining useful life, or
• Small businesses (average annual gross receipts of $31 million or less) can amended their 2022, 2023 and 2024 tax returns to deduct the R&D costs in the year incurred.

Key Points:

• Domestic R&D: Can be fully expensed in the current year, or businesses may elect to capitalize and amortize over 60 months.
• Foreign R&D: Must continue to be capitalized and amortized over 15 years.
• Software development: Qualifies as R&D expense and follows the same treatment.
• Retroactive Relief Options are available for large and small businesses (average annual gross receipts of $31 million or less).

Planning Opportunity: This may be a significant cash flow benefit for businesses investing in innovation. Contact your Simon Lever advisor to determine the best strategy for your business and whether retroactive elections make sense for your situation.

Solar Energy Tax Credits

Recent legislation has significantly shortened the timeline for businesses to qualify for the federal solar Investment Tax Credit. Under the OBBBA, commercial solar projects must begin construction by July 5, 2026, or be completed by December 31, 2027 to receive the 30% credit. The new law also introduces stricter compliance requirements and tighter definitions of what constitutes “beginning of construction.”

Due to the complexity of these new rules and tight deadlines, please consult your Simon Lever advisor before making solar investment decisions to assess your project’s eligibility and timing.

Business Interest Expense Limitation

NEW: The One Big Beautiful Bill Act makes the business interest limitation more favorable for businesses.

For tax years beginning after December 31, 2024, adjusted taxable income (ATI) is now computed WITHOUT regard to deductions for depreciation, amortization, or depletion. This returns the calculation to the more generous method similar to EBITDA that was in place from 2017-2021.

Impact:
This change benefits capital-intensive businesses and those with substantial interest expense and depreciation deductions. The restoration of this method allows businesses to deduct more interest expense, improving cash flow.

1099 Reporting Thresholds

NEW: The One Big Beautiful Bill Act enacted significant changes to 1099 reporting requirements that will reduce administrative burden for many taxpayers.

Form 1099-K

• For 2025 and beyond: Threshold returns to $20,000 in payments AND 200+ transactions
• Applies to payments through PayPal, Venmo, Cash App, Zelle, eBay, Etsy, and similar platforms
• This replaces the IRS’s previous plan for a $2,500 threshold in 2025 1099-K threshold rollback.

Forms 1099-NEC & 1099-MISC
(Independent Contractors & Miscellaneous Income)

• For 2025: Current $600 threshold remains in effect
• Starting in 2026: Threshold increases from $600 to $2,000.
• Amount will be adjusted annually for inflation beginning in 2027 One Big Beautiful Bill Act changes 1099 thresholds

Estate & Gift Planning

As you consider your estate and gift planning for 2025, it is important to be aware of the current federal gift tax exclusions and exemption amounts, which are subject to annual inflation adjustments and recent legislative changes.

Annual Gift Tax Exclusion

For calendar year 2025, you may make gifts of up to $19,000 per recipient without incurring any federal gift tax or using any portion of your lifetime exemption. This annual exclusion applies to gifts of present interests in property to each individual recipient. There is no limit to the number of individuals to whom you may make such gifts in a given year. For example, a married couple may give $38,000 per recipient by combining their individual gifts (known as “gift splitting”).

Certain direct payments for tuition or medical expenses made on behalf of another individual do not count against either the annual exclusion or the lifetime exemption, provided the payments are made directly to the educational or medical institution.

Unified Estate and Gift Tax Exemption

For 2025, the unified federal estate and gift tax exemption (also known as the basic exclusion amount) is $13,990,000 per individual. This means that, in addition to annual exclusion gifts, you may transfer up to $13,990,000 during your lifetime or at death without incurring federal estate or gift tax. Any use of the exemption for lifetime gifts reduces the amount available at death. Portability may be available for married couples to utilize any unused exemption from a deceased spouse.

Estate Tax Exemption for 2026 and Beyond

Recent legislation has permanently increased the basic exclusion amount to $15,000,000 for estates of decedents dying and gifts made after December 31, 2025. This amount will be indexed for inflation for years after 2026. This change eliminates the previously scheduled reduction of the exemption to pre-2018 levels, providing greater certainty for long-term planning.

Please consult your Simon Lever advisor to discuss strategies for maximizing your gifting opportunities or if you have questions about how these changes may affect your estate plan.

---

 

Disclaimer: Information provided by Simon Lever as part of this tax planning guide is intended for reference only. This information is not a substitute for seeking professional advice from a Simon Lever advisor. Although Simon Lever has made every effort to ensure that the information provided is accurate, the reader assumes all responsibility for the use of this information.