2025 Year-End Reminders & Planning Tips

2025 Year-End Reminders and Planning Tips

As the end of the year quickly approaches, we want to remind you of things to consider before December 31 and to provide you with some important reminders as you prepare for the tax filing season.

Protect Your Personal Information – Identity Theft continues to be an issue for the IRS and state tax authorities. The IRS and state do not initiate contact by email or phone unless they have previously contacted you by mail regarding a matter. No legitimate organization will ever ask for sensitive information through emails or other unsecured methods.

Here are some steps you can follow to protect your information:

Please forward all notices to us so we can review and respond expeditiously to the IRS or State Tax
Do not open attachments in suspicious
Read your credit card, banking, and health insurance statements carefully and often – watch for even the smallest charge that appears
Shred any documents with personal and financial
Beware of phishing scams requesting you update or verify your
Obtain an Identity Protection PIN from the IRS at the following website: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin

Secure emails from our office – We use a secure portal system called Share File to send and receive sensitive information electronically. If you wish to send us information securely using Share File, please contact us to send you the link.

Unexpected refund checks – If you receive an unexpected tax refund, DO NOT deposit or cash the check until you discuss it with us. If the overpayment should have been applied to your estimated taxes, the refund may cause you to be subject to underpayment penalties. The check can be returned to avoid incurring any penalties.

Tax Law Updates – We continue to provide up-to-date information on our website and our News You Can Use e-blasts, including the 2025 Year-End Tax Planning Guide, other articles, and planning tips for individuals and businesses, financial tools, and any late-breaking tax news. Please visit our website www.SuttleCPAs.com (if you do not have access to our website and want us to send a copy of the 2025 Year-End Tax Planning report, please let us know). If you are not receiving our email e-blasts please subscribe to our newsletter on our website or contact us and we will make sure you are on the contact list.

The information below is general in nature. You should consult with us before acting upon the information to be sure of the tax ramifications based on your specific situation.

2025 Tax Projections – If you have had any changes to your income, deductions, or withholding that could significantly alter your 2025 estimated taxes, please contact our office as soon as possible. It is important that you review your projected tax and projected tax withholding from all sources for the current year.

“No Tax on Overtime” (Overtime Deduction) – Individuals earning overtime pay can deduct up to $12,500 ($25,000 for joint filers) of overtime pay. This applies only to the “premium” portion of the overtime rate (the extra half-time pay above the regular hourly rate). This deduction begins to phase out once your modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). While this deduction reduces federal taxable income, overtime pay remains subject to Social Security and Medicare payroll taxes. Overtime pay will not be separately stated on your Form W-2 for 2025. Please submit your year-end pay stub with your Form W-2 if you received overtime pay during the year.

“No Tax on Tips” (Tip Income Deduction) – Individuals in certain tipped occupations can deduct up to $25,000 of tip income in 2025. If you are married and only one spouse has tip income, you can still only deduct up to $25,000. If both spouses have tip income, then up to $50,000 of income can be deducted. This deduction begins to phase out by $100 for every $1,000 of Modified Adjusted Gross Income above $150,000 ($300,000 for joint filers). Importantly, while this deduction reduces federal taxable income, tips remain subject to Social Security and Medicare payroll taxes and must be reported as wages for payroll tax purposes.

Interest Deduction for Passenger Vehicle Loans – Eligible taxpayers who itemize or do not, may deduct up to $10,000 of non-business interest expense on the purchase of a new, qualified personal use passenger vehicle. The deduction is not available for used vehicles, leases, or vehicles purchased for business or commercial purposes. The vehicle must have final assembly in the US and be under 14,000 pounds. Lenders may provide a breakdown of interest paid on this loan. If not, you may have to request it from the financial institution. This deduction also requires you to list the vehicle’s VIN on your return. The deduction begins to phase out when a taxpayer has a modified adjusted gross income over $100,000 ($200,000 for joint filers). The deduction is available even if the taxpayer does not itemize.

Senior Deduction – Starting in 2025, taxpayers who are 65 or older at the end of the year qualify for a $6,000 deduction ($12,000 for joint filers). This deduction begins to phase out once modified adjusted gross income exceeds $75,000 ($150,000 for joint filers). The deduction is available even if the taxpayer does not itemize.

Bonus depreciation phase-out ends – Qualified assets placed into service after January 19, 2025, are eligible for the 100% bonus depreciation deduction. Assets placed into service before January 19, 2025, are still subject to the 40% bonus depreciation deduction. The reinstated 100% bonus depreciation is now permanent and will not be reduced in future years.

Required minimum distribution rules changed: The SECURE 2.0 Act, passed in 2022, raised the starting age for RMDs from 72 to 73 as of January 1, 2023. Just a reminder, if you are 70½, you can take advantage of the exclusion for direct charitable donations of IRA funds (up to $108,000). This exclusion counts toward your required minimum distribution if you are age 73.

Roth IRA conversions – If you expect your 2025 income to be lower than usual or if you expect your income in 2026 to push you into a higher tax bracket, a Roth IRA conversion may be an advantageous way to convert traditional-IRA money invested in any beaten-down stocks (or mutual funds) into a Roth IRA in 2025 if eligible to do so. Keep in mind that the conversion will increase your 2025 income, which may reduce tax breaks subject to phase-out at higher adjusted gross income levels. This may be desirable, however, for those potentially subject to higher tax rates under pending legislation.

Year-end investment moves – Tax considerations should not drive your investment decisions. However, it is worth considering the tax implications of any year-end investment decisions you make. If you have capital gains from sales of investments, you may want to consider selling securities in loss positions to reduce your tax. If you plan to make substantial donations by selling stock, consider donating appreciated stock or digital assets. You will receive a deduction for the stock’s fair market value and will not have a reportable capital gain.

Deduction timing – When paying deductible items, you should pay them in the year (2025 vs. 2026) you expect to be in a higher tax bracket. Keep the following in mind: An expense is only deductible in the year it is paid for cash basis taxpayers. Expenses paid in 2025 by credit card are deductible when posted, even though you pay your credit card bill in 2026.

Retirement Plans – There are several types of retirement plans available for self-employed individuals and small businesses. Some of the plans must be established by December 31. If you plan to set up a 2025 plan, please give us a call to discuss which plan would be best for your business.

State and Local Taxes – If itemizing, the deduction for state and local taxes paid increased to $40,000 for single and joint filers. The $40,000 cap begins to phase out once income exceeds $500k for single and joint filers. This deduction is a combination of property taxes and both state and local income taxes or sales taxes paid during the tax year. Therefore, it is not tax-advantageous to prepay your fourth-quarter state estimate if you are already over the $40,000 limit.

WV Motor Vehicle Property Tax Adjustment Credit – West Virginia has implemented a tax credit for motor vehicle taxes paid on time to be credited to your WV tax liability. You will receive a tax credit certificate in January 2026 from the WV Tax Division or online (tax.wv.gov). Please provide this form to us to claim this credit.

Charitable Contributions – For the 2025 tax year, there are no changes to the rules surrounding charitable deductions. We continue to remind you to ensure you are receiving the required documentation for any gift of $250 or more (the letter should state that no goods or services were received). There has been some information provided that indicates the IRS may be conducting more audits related to charitable contributions, especially for non-cash contributions. Making sure you keep all your documentation remains important.

Starting in 2026, non-itemizers can deduct up to $1,000 for single filers ($2,000 for joint filers) for cash donations during the year. Donor Advised Funds are excluded from this. Additionally, there will be a 0.5% Adjusted Gross Income Floor that will reduce the total charitable contribution deduction that you will receive. For taxpayers in the top 37% federal income tax bracket, the value of all itemized deductions, including charitable, will be capped at 35% of the total amount of deductions. You may consider making your 2026 donations in 2025, when there isn’t a limitation on them. We can help you assess that opportunity.

Digital assets – If you have bought, sold, received, sent, transferred, or otherwise transacted with digital assets please let us know. There will be additional work required to capture and report this data within your tax return. Note that digital assets are treated as property by the IRS and therefore digital asset transactions may result in short-term or long-term capital gains. You may receive a new form this year detailing activity from digital assets, Form 1099-DA.

Make year-end friends and family gifts before December 31 – A person can make gifts to any other person (related and non-related) totaling up to $19,000 for 2025 and 2026 without requiring a gift tax return or starting to use the lifetime exemption. The 2025 annual exclusion amount increases to $38,000 per donee if the donor and spouse make gifts to the donee, including gift splitting. The unused exclusion does not carry over to the next year. Direct payment to the provider for education and medical expenses does not count against the annual exclusion. The 2025 lifetime estate and gift tax exemption is $13.99 million ($27.98 if married). The 2026 lifetime estate and gift tax exemption will be $15 million per individual.

Special rules allow a donor to contribute more than $19,000 in the current year to a §529 College Savings Plan and have the annual exclusion for up to four subsequent years apply without incurring any gift tax. The contribution to a 529 Plan may also entitle you to a state income tax deduction if you contribute to a plan sponsored by your state of residence. Keep in mind, 529 contribution maximums vary by state.

Carryover tax basis – For gifted property, the donee has the same income tax basis and holding period as the donor. There are special rules if the fair market value of the asset at the time of the gift is lower than the adjusted basis. Generally, the tax basis of inherited property is the fair market value on the date of death. These rules may be changed with any new tax laws.

Review All Planning Documents – Each year as you gather and organize your tax information, it is the perfect time to review all of your estate planning documents – wills, trusts, powers of attorney, medical directives, etc. – to account for births, deaths, divorces, and other changes that occurred. It is also important to review your beneficiary designations included in your life insurance policies, annuities, IRAs, and other retirement plans.

Filing Forms 1099 – If you have paid over $600 in your trade or business to an individual or other entity (excluding corporations) you may have Form 1099 filing requirements. Form 1099s are due January 31 to the recipient and IRS. If you need our assistance with your filing requirements, please let us know. You will be asked on your tax return if all required Forms 1099 were filed. The IRS will impose a perform penalty if you do not file a Form 1099 when required. As you prepare your business for year-end, please review your vendors to determine if this rule applies to you.

TAX SEASON REMINDERS

Individual Tax Organizers – Your 2025 Tax Organizer, customized from your prior year return information, will be mailed to you in the coming weeks. Additional information regarding your tax data and documents will be included.

Remember, you do not need to transcribe information already contained on the tax documents. Use the Organizer as a guide to be sure you have everything, or to note new items and those that did not recur this year. We will pick up the details from the tax documents. If you have some information in another form (Excel schedules, QuickBooks reports, etc.), you can provide those schedules in lieu of entering the details in the related section of the Organizer.

Please provide the original copies of all tax documents. We use a scanning technology that does not work as well with copies. This includes Forms W-2’s, 1099’s, 1098’s, K-1’s, and complete year-end brokerage statements. We will return all original documents to you.

The Organizer and your tax data must be returned to our office by March 9, 2026. All tax documents, with the exception of Schedule K-1s and certain brokerage statements, should be received by then. Please hold your information until complete, with those limited exceptions. Tax information received after the deadline may require an extension of time to file the returns.

Safe Send – We are encouraging our clients to use a program called Safe Send Returns to electronically deliver and sign their tax returns. If you choose this method of delivery, you will not receive a bound, paper copy of your return (unless you request it). We will have additional information on this in your year-end tax Organizer packet.

Tax Season Office Hours – Monday through Friday from 8:30 a.m. to 5:00 p.m. We are available by appointment outside of regular office hours.

Satisfaction and Referrals – Our goal is to provide the highest level of professional service. If this is not happening, please let us know so we can correct any problems. Thank you for your referrals. If you know of others who will benefit from the service we provide, please let them know. We appreciate your confidence.

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