2025 Year-end tax moves for businesses

Article | November 19, 2025

Authored by Weinlander Fitzhugh

As 2025 draws to a close, business owners have more certainty regarding many tax provisions that were previously set to expire. The One Big Beautiful Bill Act (OBBBA), signed into law mid-year, preserved many provisions from the Tax Cuts and Jobs Act (TCJA), made others permanent, and clarified the direction of federal tax policy heading into 2026.

With major provisions now settled for the foreseeable future, businesses can make informed choices not only to manage current liability but to align structure, compensation, and investment strategies with a more predictable tax code.

Here are some of the most relevant strategies to consider before the end of the year.

Maximize the QBI deduction

The 20% deduction for qualified business income (QBI) for sole proprietors, S corporation shareholders, and partners has now been made permanent. This means eligible owners of pass-through entities can plan with more certainty.

QBI generally refers to the net amount of income, gain, deduction, and loss from a qualified domestic trade or business. It doesn’t include capital gains/losses, dividend income, interest income (not allocable to a trade or business), wage income, or guaranteed payments to partners. 

If your taxable income remains below $197,300 (or $394,600 if married filing jointly), you can generally deduct the full 20% of your QBI. Once taxable income exceeds the threshold, the deduction becomes subject to wage and property limitations. In such a case, the deduction is limited to the greater of: 

• 50% of W-2 wages paid by the business, or
• 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. 

For specified services, trades, or businesses (SSTBs) such as law, health, performing arts, consulting, athletics, and financial services, the deduction is subject to a stricter income phase-out, and fully phases out once income exceeds the top of the range. Non-SSTBs, on the other hand, may still qualify depending on how much they pay in W-2 wages and how much qualified property they own. 

Starting in 2026, the income ranges where limits phase in will be expanded, allowing more partial deductions for higher earners. The OBBBA also introduces a modest minimum deduction ($400) for qualifying small business owners with at least $1,000 in QBI who materially participate in the business.

Year-end move

Run income projections now to assess whether you’ll benefit most by managing income below phaseout levels or adjusting wages to optimize your deduction under the wage/property test. If you’re over the threshold or close to it, work with an advisor to evaluate strategies like increasing W-2 wages or grouping related businesses under IRS aggregation rules to maximize the deduction.

Structure matters 

Under the OBBBA, the tax rates for both corporations and pass-through business owners are now anchored: the federal corporate rate remains 21%, and the 37% individual top rate will continue to apply. With the 20% QBI deduction made permanent for pass-throughs, many of the structural “moving parts” that caused uncertainty in prior years are now settled.

That doesn’t mean that entity choice is irrelevant, though. In fact, your structure still should be reviewed. But rather than being driven solely by fear of rate increases or expiring benefits, the decision now hinges on long-term strategy: how you plan to distribute profits, reinvest in the business, transfer ownership, and position for state-level taxes or other policies.

With a flat 21% rate, C corporations can be advantageous when profits are retained and reinvested rather than distributed. But any distributions trigger a second layer of tax on dividends. 

Pass-through owners benefit from the avoidance of double taxation and the QBI deduction, but eligibility and magnitude of the deduction depend on income thresholds, W-2 wages, and qualified property. If you exceed those limits (especially for SSTBs or closely held firms lacking significant W-2 wages or property), the effective rate on pass-through income could approach or even exceed what a C-corp owner might face when factoring distributions.

Year-end move

If your business is structured as a pass-through and you expect taxable income to remain well below the QBI thresholds, maintaining that structure likely remains attractive.

If, instead, you are projecting taxable income above those thresholds, or you run an SSTB, or you intend to retain significant earnings in the business rather than distribute them immediately, it’s time to ask your advisor to model alternatives, such as converting to a C corporation, adjusting owner compensation, or reorganizing how profits are distributed.

Capital investment: depreciation and expensing incentives

Bonus depreciation – Section 168(k)

The OBBBA restores 100% bonus depreciation permanently for qualified property acquired and placed in service after January 19, 2025, reversing the prior phase-down schedule. “Qualified property” generally includes tangible personal property with a recovery period of 20 years or less, certain computer software, and used property acquired from unrelated parties. 

A transitional election exists: for the first tax year ending after January 19, 2025, taxpayers may elect to apply a lower rate (40% in many cases). 

Section 179 expensing

The deduction cap under Section 179 is increased to $2.5 million, and the phase-out threshold is raised to $4 million of qualifying property placed in service in the year. These numbers are effective for property placed in service in taxable years beginning after December 31, 2024.

Section 179 remains limited to the business’s taxable income (i.e., you cannot use it to create a net operating loss) and cannot apply to the same asset in the same year that you claim bonus depreciation.

Because many states do not conform to the bonus depreciation rules or offer limited conformity, Section 179 can be a valuable alternative in multi-state planning.

Year-end move

If you plan to purchase equipment, software, or make building improvements before year-end, coordinate with your advisor to determine whether Section 179 expensing or 100% bonus depreciation (or a mix) gives the greatest benefit, especially in light of your business’s taxable income, asset types, and state-tax implications.

If you operate across multiple states, review whether those states conform to federal treatment of bonus depreciation or Section 179 rules, as your effective deduction value may differ depending on state-tax treatment.

Business losses and excess business loss rules

Under the TCJA and subsequent legislation, non-corporate taxpayers remain subject to limits on “excess business losses.” The OBBBA makes those limits permanent.

For tax years beginning in 2025, non-corporate taxpayers cannot offset more than $313,000 (single) or $626,000 (married filing jointly) of business losses against other non-business income. Losses above these thresholds aren’t lost; instead, they’re carried forward and treated as a net operating loss (NOL). That NOL may be used in future years to offset income, but those future NOL deductions generally are limited to 80% of taxable income for losses arising in years after Dec. 31, 2017.

Year-end move

If your business is projecting a significant loss in 2025, coordinate with your advisor to determine whether shifting expenses or income can keep the loss below the threshold so it’s fully deductible now, or plan how to use an NOL in future years under the 80% limitation. 

Check your estimated tax payments

If your income increased in 2025 through higher profits, bonuses, or unexpected gains, you may need to make additional estimated tax payments before year-end to avoid underpayment penalties.

The IRS requires individuals (including self-employed business owners) to pay taxes throughout the year as income is earned. If your prior estimated payments were based on lower 2024 income, those payments may no longer be sufficient to cover your 2025 liability.

Year-end move

Use IRS Form 1040-ES or work with your CPA to calculate whether a “catch-up” payment is needed. The IRS safe harbor rules generally require you to pay at least 100% of last year’s tax liability, or 110% if your adjusted gross income exceeded $150,000.

If you expect your 2025 tax bill to be significantly higher than last year’s, you can generally avoid underpayment penalties by ensuring your quarterly payments total 110% of your 2024 tax liability. Making a final estimated payment by January 15, 2026 (the Q4 deadline), can help you meet this safe harbor even if your 2025 liability ultimately exceeds the amount paid. 

Retirement & savings strategies

Retirement plan contributions continue to be a key tax-saving strategy, especially when combined with entity structure, compensation planning, and income-timing.

If your business has not yet established a retirement plan (e.g., SEP IRA, Solo 401(k), SIMPLE), 2025 remains a strong year to do so. For certain plans, contributions can be made as late as the business’s tax-return deadline (including extensions). 

Year-end move

Review whether you or your business should establish or fully fund a retirement plan before year-end, especially if you expect to benefit from taxable income reduction (which may preserve QBI deduction eligibility) or want to reduce exposure to the 3.8% NIIT (Net Investment Income Tax), or expect significant earnings that could be tax-efficiently deferred or sheltered via a qualified plan.

Don’t neglect the fundamentals: inventory, receivables, and books

As the year closes, it’s an ideal time to perform the foundational tax and finance housekeeping that supports deduction integrity and audit readiness. 

• Inventory: conduct a physical count, evaluate obsolete or slow-moving items, and consider write-downs or write-offs where appropriate.
• Receivables: for accrual-basis taxpayers, analyze aging receivables and consider writing off uncollectible amounts as bad-debt deductions.
• Recordkeeping: ensure intercompany transactions, shareholder/owner compensation, profit distributions, and loan arrangements are properly documented.
• De minimis safe harbor: businesses may elect to immediately expense qualifying tangible property if certain criteria are met. For taxpayers with an Applicable Financial Statement (AFS), the threshold is $5,000 per item or invoice; without an AFS, the threshold is $2,500 per item or invoice.

Year-end move

Schedule a year-end review of inventory and receivables, document any material property acquisitions, and ensure your expensing policy is in place for safe-harbor treatment of smaller purchases.

Tailor your strategy now, while time remains

With many of the major business tax provisions of the Tax Cuts and Jobs Act now permanent or clarified under the OBBBA, tax planning in 2025 is less about anticipating sweeping legislative change and more about maximizing opportunity within a clearer framework.

The strategies above can help reduce your 2025 liability and position your business more strategically for the years ahead. But the right moves will depend on your structure, income mix, investment plans, and long-term goals.

Before the year closes, schedule time with your CPA or tax advisor. Because the OBBBA changes are in effect now, proactive planning could unlock savings that extend beyond this tax year.

For personalized guidance, please contact our office.