There’s still time to save 2025 taxes
Just because it’s December doesn’t mean it’s too late to reduce your 2025 tax liability. Consider implementing one or more of these year-end tax-saving ideas by Dec. 31: 1) Defer income and accelerate deductions. 2) Harvest investment losses. 3) Donate appreciated stock to qualified charities. 4) Maximize pre-tax and deductible retirement plan contributions, including catch-up contributions if you’re age 50 or older. Some of these strategies will be beneficial only if you itemize deductions. Other factors could make these ideas less beneficial in certain circumstances. Contact us to discuss what makes sense for your situation and more last-minute tax-saving strategies.
Is it time for your business to start outsourcing?
As your small to midsize business grows, handling every operational task in-house can stretch your talent and resources while unnecessarily elevating certain risks. It may be time to consider outsourcing functions such as accounting and financial reporting, customer service, information technology, and payroll and human resources. Doing so can improve efficiency, strengthen compliance and free up your team to focus on revenue-generating work. Just bear in mind that you’ll need to vet providers thoroughly, incur ongoing engagement costs and put effort into maintaining outsourcing relationships. Contact us for help evaluating your options and understanding the financial and tax implications.
6 last-minute tax tips for businesses
Year-round tax planning generally produces the best results, but there are some steps you can still take in December to lower your 2025 taxes. Here are six that business owners should consider: 1) Postpone invoicing. 2) Prepay expenses. 3) Buy equipment. 4) Use credit cards. 5) Contribute to retirement plans. 6) Reduce income if needed to qualify for the “pass-through” deduction. These strategies are subject to various limitations and restrictions and won’t be beneficial for every business owner. So consult us before implementing them. We can also offer more ideas for reducing your taxes this year and next.
Have you used up your 2025 FSA funds?
If you have a flexible spending account (FSA) through your employer to help pay for health or dependent care expenses, now’s a good time to check your balance. FSAs generally require you to use the funds by year end or forfeit them. The 2025 pretax contribution limit to a health care FSA is $3,300. To avoid forfeiting health care FSA funds because of the “use-it-or-lose-it” rule, you must incur eligible medical expenses by the last day of the plan year (Dec. 31 for a calendar year plan), unless the plan allows a grace period or $660 rollover. Dependent care FSAs are also generally subject to a use-it-or-lose-it rule. The pretax 2025 contribution limit is $5,000. Additional rules apply.
How will taxes affect your merger or acquisition?
Whether you’re selling your business or acquiring another company, the tax consequences can have a major impact on the transaction’s success or failure. So if you’re thinking about a merger or acquisition, you need to consider the potential tax impact. For tax purposes, a transaction can basically be structured as either an asset sale or a stock sale. For tax and nontax reasons, sellers typically prefer stock sales while buyers usually prefer to purchase assets. We can assess the potential tax consequences before you start negotiating a merger or acquisition to help avoid unwelcome tax surprises after a deal is signed. Contact us to get started.
Businesses that sponsor a 401(k) must stay on top of it
If your business sponsors a 401(k) plan, year end is the perfect time to make sure you’re on top of your fiduciary responsibilities and administrative processes. A well-run plan should never be regarded as “plug-and-play.” To avoid legal troubles and uphold participants’ confidence, regularly reevaluate investment selection and management, fee structure (including total plan cost), third-party administrator performance, and ERISA compliance. Periodic internal audits can help catch inconsistencies, misunderstandings and wrongdoings before they turn into costly plan failures. Contact us for help identifying costs and fees, spotting potential compliance gaps, and tightening internal controls.
New itemized deduction limitation will affect high-income individuals next year
Beginning in 2026, taxpayers in the top (37%) federal income tax bracket will see their itemized deductions reduced. Generally, their tax benefit from the deductions will be as if they were in the 35% bracket. If you’re at risk of being subject to the new limitation, you can take steps in 2025 to help mitigate the negative impact. For example, make large charitable contributions this year instead of next. If you aren’t already maxing out your state and local tax (SALT) deduction, you might be able to pay state and local property tax bills in 2025 instead of 2026. We can help you look at your tax picture for this year and next to determine what strategies will be most beneficial overall.
New deduction for QPP can save significant taxes for manufacturers and similar businesses
New for 2025, 100% first-year depreciation is available for nonresidential real estate classified as qualified production property (QPP). QPP generally means factory buildings. Normally, nonresidential buildings must be depreciated over 39 years. QPP 100% first-year depreciation is available for property whose construction begins after Jan. 19, 2025, and before 2029. The property generally must be placed in service in the U.S. or a possession before 2031. Also, the original use of the property generally must commence with the taxpayer. Additional rules and limits, as well as some exceptions, apply. IRS guidance is expected. Contact us with questions and to learn about the latest developments.
Productivity metrics can help business owners see reality
Productivity metrics give business owners a clear view of how effectively they’re using time, talent and capital. Common examples include revenue per employee, output per hour worked, utilization rate and customer satisfaction scores. Choosing the right metrics and tracking them consistently over appropriate intervals allows you to identify inefficiencies, streamline operations and align employee performance with strategic objectives. For small companies, simple spreadsheets may be adequate. But don’t overlook more sophisticated tech solutions, such as digital dashboards and project management platforms. Contact us to start leveraging productivity metrics that help your business thrive.
Shift income to take advantage of the 0% long-term capital gains rate
Are you thinking about making financial gifts to loved ones? Would you also like to reduce your capital gains tax? If so, consider giving appreciated stock instead of cash. You might be able to eliminate all federal tax liability on the appreciation, or at least significantly reduce it, by giving appreciated stock instead of cash to loved ones in the 0% bracket. The recipients can sell the assets at no or a low federal tax cost. Before acting, make sure the recipients won’t be subject to the “kiddie tax.” Also consider any gift and generation-skipping transfer tax consequences. We can answer any questions you have and suggest other ways you can reduce taxes on your investments.