Attention to year-end tax planning tasks can lower 2025 liability and save you money for the years to come:
Tax planning goes way beyond compliance with federal, state and local tax authorities. It’s a science and an art that affects risk exposure for your business, alters the arc of your growth trajectory and materially impacts profitability.
With so much at stake, CFOs, CEOs, CAOs and finance professionals can’t afford to take chances. That’s especially true now, when new legislation and dynamic global trade policies have shifted the tax landscape. The One Big, Beautiful Bill Act (OBBBA) and other pending legislation have created new opportunities as well as confusion around which rules still apply and what approaches still make sense in each sector.
But many decisions are time sensitive. Legislative sunsets mean that if you don’t act now, you could miss the opportunity to maximize certain savings opportunities. Business leaders have a narrow window in which to make impactful decisions before December 31, 2025, while also managing year-end close and budgeting responsibilities.
This white paper offers a comprehensive year-end planning guide for businesses, focused on strategies to reduce tax liability, optimize cash flow and prepare for 2026. It addresses key planning moves influenced by new legislation and routine tasks to think about each year, as well as highlighting opportunities specific to different industries. Use the guide to help ensure you don’t overlook any credits, deductions or planning opportunities that could potentially reduce your tax liability.
OBBBA is a massive piece of legislation that ushers in sweeping tax changes. Business leaders and owners need to make strategic tax shifts to capitalize on the opportunities the bill presents.
Many of OBBBA’s effects kick in for the 2026 tax year, though some are already active in 2025. As the year draws to a close, block out time to sit down with a tax advisor and adjust your tax posture in areas that include:
OBBBA also spelled an early end to numerous tax incentives that were part of the Inflation Reduction Act and imposes two new overarching policies:
The accelerated five-year cost recovery period is no longer in force; standard depreciation periods apply for all tax years that begin on or after January 1, 2025.
OBBA establishes Prohibited Foreign Entity (PFE) restrictions on Foreign Entities of Concern (FEOC). These rules disallow energy credits for projects that are owned, controlled or aided by material assistance from an entity that has ties to a country of concern (usually understood to include Iran, China, Cuba, North Korea and Russia).
Effective after tax year 2025, third-party leased residential projects (e.g., solar water heating and small wind) will no longer qualify for these credits.
If your business has planned or implemented investments based on any of these IRA energy credits, you’ll want to review your strategy in light of the updated expiration dates:
The Commercial Clean Vehicle Credit (Section 45W) ended this year under OBBBA; the incentive is only available for vehicles your business acquired by September 30, 2025. However, the bill extended the Alternative Fuel Vehicle Refueling Property Credit (Section 30C) that applies to charging infrastructure you install in eligible locations for EVs and other clean fuel vehicles. You must place eligible equipment in service by June 30, 2026, to claim this credit of up to $100,000.
Section 179D provides federal tax credits for energy-efficient commercial buildings that you own, design or retrofit. With the earlier phaseout of these credits, you’ll need to begin construction before June 30, 2026, if you want to claim the credit.
As with the 179D credit, builders will need to begin construction before June 30, 2026, in order to be eligible for tax credits that apply to newly constructed (or substantially reconstructed) energy-efficient homes.
The Clean Energy Electricity Production Credit (Section 45Y) and Clean Electricity Investment Credit (Section 48E) for solar and wind energy won’t apply to facilities that have not yet been placed in service as of December 31, 2027. There’s some wiggle room, however, as long as you begin construction by July 4, 2026, to place wind and solar projects in service beyond December 31, 2027. The normal phaseout of other 45Y and 48E projects begins in 2034 for projects that use geothermal, nuclear, hydrogen or other alternative sources of energy.
The Inflation Reduction Act established or strengthened a wide variety of other energy credits that have been terminated or curtailed early as part of OBBBA, including:
Clean energy credit transfers are also impacted, including:
If your business operates globally, you’ll need to consider legislative updates along with other business considerations to keep your cross-border activities compliant as well as profitable.
OBBBA adjusted several international tax provisions and updates other parts of the international tax framework, including rules for controlled foreign corporations, income sourcing and foreign tax credits:
The net effect is a mixed bag: higher taxes on foreign earnings but a more predictable international tax environment, along with new credits that encourage domestic production and exports. Given these changes, multinational companies should prepare to adjust supply chains, IP structures and financing strategies to limit exposure and capture new incentives.
Few topics garnered more sustained attention during 2025 than the ever-evolving global trade and tariff policies emanating from the U.S. government. The constant lurches in all directions left business leaders queasy, shaking up operational and financial realities for companies across most sectors. But waiting out the drama isn’t a viable option. Take these steps instead:
State and local tax (SALT) has become increasingly complex. In a marketplace no longer limited by geography, managing tax liabilities and compliance responsibilities is a significant concern. From apportionment analysis to taxability of intangibles, business leaders need to take a strategic approach to state and local tax to reduce their liabilities in today’s SALT environment.
To stay compliant, you need to continuously review and assess your business’ state and local tax obligations. Work closely with your tax advisor to evaluate how changing standards and shifting business models interact to affect your state liabilities — and their effect on your overall tax picture. Be sure your analysis includes careful scrutiny of:
Every state offers a unique set of tax credits and incentives for businesses that operate within the jurisdiction, as do many local tax authorities. Following OBBBA, state decoupling from federal policy is likely. For example, because amortization of R&D expenses over time effectively raises revenue, some states may stick with the amortization requirement even though federal law again permits immediate expensing of domestic R&D costs. Be sure to review new opportunities and obligations in the states and municipalities that apply to your business.
While the changes to the federal limits on deductions for state and local tax (SALT) don’t affect C corporations, the new rules can have a big impact on partnerships, S corps and other passthrough businesses. OBBBA lifts the SALT deduction limit to $40,000 temporarily for itemizers, with a 1% annual increase for inflation. The higher limit begins to phase out for business owners with a modified adjusted gross income of over $500,000 and reverts to $10,000 at a MAGI of $600,000. These owners should look for opportunities to employ a passthrough entity workaround — especially if you live in a high-tax state.
Concern that OBBBA would delegitimize passthrough entity tax (PTET) workarounds that many states have put in place proved unfounded; the bill leaves these legal loopholes in place. Typically, PTETs work by allowing passthrough businesses to elect to pay state and local taxes at the entity level. Doing so transforms these taxes into a business expense that’s fully deductible on federal tax returns, despite a federal limit on these deductions for individuals. Explore the availability and details of workarounds in your state, including due dates and whether you need to make the election annually or just once.
Business owners face a special challenge in aligning what’s best for the business with what’s best for the individual in terms of tax. If you own a business, pay close attention to these common problem areas and work with an advisor who understands the complex interplay between personal and business tax concerns.
The extension of the QBI deduction is good news for owners of passthrough businesses. The bad news is that many business owners aren’t making the most of that tax savings opportunity. For example, drawing a high salary from an S corporation means you’re lowering your QBI deduction and probably paying the top 37% tax rate on your salary. If you significantly lower the amount of your salary, the difference becomes QBI-eligible business revenue. In addition, you’re paying lower taxes by avoiding the 37% hit on W-2 income. To replace the salary you’re losing, you can take an owner draw that’s not subject to self-employment taxes.
The OBBBA put new limits on tax deductions for charitable donations. There’s a 0.5% floor on deductions that begins in 2026, meaning you’ll only be able to deduct donated amounts that exceed 0.5% of your adjusted gross income. The more generous previous rules remain in effect for 2025, so it could make sense to accelerate your giving into 2025 while you can claim the biggest deduction. If you’ve planned significant donations over future years (e.g., you’re funding construction of a new building for your alma mater), you might also consider contributing the full amount of the gift into a donor-advised fund this year. You’ll be able to claim a deduction for the total amount now and can release the funds incrementally to the recipient over time, as you’d originally planned.
Formulating succession plans and getting your business in great shape for a potential transition is a multiyear process. Be sure your plan addresses these common pain points:
Careful preparation is key to getting the most value from a privately held business, but it can’t be done in a silo. Work through the exit planning process with a coordinated team that includes estate planning professionals, tax advisors and financial planners as well as business advisors and M&A specialists. Ensuring that these experts share knowledge and communicate freely puts you in the best position to achieve your objectives within and outside the business, so you can enter the next phase with maximum cash flow and no regrets.
Addressing business planning and maintenance duties annually helps you not only manage your tax obligations effectively but also can help keep the organization operating at peak efficiency.
A comprehensive approach to tax planning involves looking at disparate parts of your business to make sure they’re all supporting your defined business objectives. The following tasks affect a wide variety of internal and external functions, but all are essential for maintaining a strategically aligned and goal-oriented business.
Gain and share a detailed understanding of tax liabilities by jurisdiction.
What is your company’s tax liability in each jurisdiction? This is important to know because ASU 2023-09 rules go into effect for private companies on December 15, 2025. (Public companies must comply with the update for periods beginning in December 2024.) Under the new rules, financial statements must present:
Take a critical eye to your business model.
Review your business model in terms of the tax impacts of your current operations and any potential operational changes:
Changes to your business model carry tax implications based on the classification of income, deductions, tax credits, compliance requirements and other factors. That’s why it’s important to explore the ramifications of changes before you make a move — and to look regularly for potential changes that could benefit your business as well as your tax picture.
As year-end approaches, it’s also worth considering how industry shifts and market trends may impact your reporting obligations. Similarly, it’s an important time to review new deductions and credits that may reduce your overall tax liability (with or without changes to your business model).
Review changes to your customer base.
How well does your business understand and connect with the customers who directly control your success? Changes in your customer base can affect your revenue, expenses and profitability, ultimately impacting your business tax burden.
This kind of analysis can help you stay in compliance and identify potential tax savings based on your customer-related expenses and income fluctuations.
Look inside and outside the business for savings opportunities.
Internal factors such as your compensation structure and employee benefits can influence your tax liability and strategy.
External factors such as new regulations, industry standards and economic conditions should also influence your tax strategy. When you stay abreast of these changes, you can adjust your tax position to support continued business success.
Consider the timing of expansions and new investments.
Maintaining the right level of working capital should always be at the top of your list. Besides affecting cash flow and financing costs, the timing of capital investment can greatly impact tax incentives, year-end deductions and depreciation.
If your business plan includes expansion or fixed asset investments, determine whether you can implement these plans by year-end and when you’ll get the most tax bang for your investment buck.
With the return of 100% bonus depreciation, you can time capital investments for the most impact without worrying about losing tax benefits if you wait until 2026.
Look at projected revenue, deductions and future regulatory changes to decide whether the tax payoff of capital investment is more valuable in 2025 or future years.
Your strategic and operational needs should drive expansions and investments. Tax considerations are secondary, but they can help you make well-informed choices about the timing of these business enhancements.
Explore the tax implications of your business plan and growth stage.
How does your business plan and position in the growth cycle interact with the current tax and economic landscape? For example:
Keep an eye on dynamic forces that could affect your business. With interest rates poised to drop further and global tensions still high, 2026 could look quite different.
To discover the full range of tax-saving possibilities, work with an experienced tax professional. They can help you determine how your business plan interacts with tax laws, provide valuable insights and suggest timely strategies to help you lighten your tax load.
All tax planning begins with good financial records. A thorough review of your financial statements helps ensure accuracy and confirms that numbers are up to date as you approach the end of the year. The extra effort now also helps prevent errors that can slow down your tax return preparation process or lead to mistakes and IRS penalties.
The threshold for reporting vendor and contractor payments on Form 1099 drops to $600 for 2025 before rising to $2,000 in 2026, with future levels indexed to inflation. Employers should also be prepared to meet new payroll reporting requirements: You’ll need to track and report qualified tips and overtime pay, since employees may be able to claim federal tax deductions based on these amounts.
Choose any reasonable method of estimating and reporting qualified tips and overtime income for your employees until the IRS releases updated W-2 forms (scheduled for 2026).
If you’re in retail or you have significant seasonal revenue variation, your fourth-quarter results can have a meaningful impact on your taxes. Take the time to create realistic cash flow projections for your 2024 revenue. Sound estimates before year-end allow you to tweak your tax position to minimize your tax bill.
Besides easing tax compliance, keeping your books clean and your accounting current shows that you’re on top of your game. It tells employees, lenders and potential buyers that this is a business to respect — not one to dismiss, overlook or target for fraud.
Corporate giving gets a new look in 2026, with a 1% deduction floor. Gifts must exceed 1% of the business’s taxable income to be deductible, and those below that threshold do not carry over. You may carry over donations above 10% of taxable income, which becomes the ceiling for business deductions based on charitable giving. Because the new rules don’t kick in until the 2026 tax year, 2025 is a great time to accelerate your company’s charitable giving and take advantage of the more generous rules currently in place.
Consider your business structure and determine whether it is still the most tax-efficient option for your situation:
No matter how enticing the tax attributes may be, keeping your business structure aligned with your end goal always takes priority. Consult a professional to evaluate how well your current entity type meets your business needs and plays into your tax situation.
Review your financial procedures and internal controls to identify areas where you can enhance financial accuracy. Recognizing the gaps and investing in updated systems at the right moment lets you capture significant tax savings.
With the latest accounting tools, you’ll have higher-quality data that allows you to better pinpoint specific expenditures you incurred during the current period. This kind of timely, detailed data helps you claim and document all the tax incentives and credits you’re entitled to claim. Phasing out legacy software can also help you achieve better security, improve reporting accuracy and introduce more efficient workflows that benefit your tax planning process.
Multi-year budgets and tax projections can help you prepare for potential tax-saving opportunities. Your tax advisor should analyze your income, expenses, deductions and credits over multiple years. This long-range view lets you develop a tailored plan that aligns with your business and financial goals while helping you benefit from anticipated changes:
Proper fiscal housekeeping and well-organized financial records make it easier to create long-term projections that help you position your business for peak tax savings. These sound business practices also help streamline the tax planning process to improve reporting accuracy and regulatory compliance.
Carefully evaluate your employee bonus plan to confirm that it’s financially feasible, well-documented and meets your deductibility requirements. Prepare for the financial impacts of any non-deductible portions of planned bonuses.
Is it feasible to place assets in service by year-end to qualify for bonus depreciation? Would it be more valuable to amortize new investments over time? Assess which available depreciation terms yield the most valuable tax deductions for your situation, based on your projected income, future plans and the availability of other credits and incentives. While class life determines the number of years over which you must depreciate an asset, the depreciation method that best fits your business depends on your company’s size, industry and the type of asset you purchased.
Consider reaching out to a tax expert to conduct a cost segregation study for new construction, expansions or remodels. This can accelerate depreciation and generate tax savings for your business. For every $1 million reclassified to personal property, you can expect these savings (the example uses 7-year lives in both instances for personal property):
The SECURE 2.0 Act established new rules for company-sponsored retirement plans. If you already have a 401(k) plan for your business, you may need to amend it to comply with the updated requirements. The IRS is offering an extended period in which to amend existing plans, so be sure you understand the new rules and complete any changes by the December 31, 2026, deadline. You’ll also need to make sure you’re complying with new requirements for 2025 that may apply to your retirement plan, including:
In addition to ensuring compliance, you may want to consider layering a profit-sharing plan on top of your current 401(k) plan to benefit employees and increase retention of key talent. For certain types of businesses, profit-sharing can offer major tax benefits over providing employees with this income as W-2 earnings.
Unloading obsolete inventory can be more than an effective management technique. If you donate your serviceable but unneeded inventory to charity, you may be able to claim a charitable donation deduction up to your cost basis that could help you recover a portion of your original investment.
In some cases, when inventory becomes obsolete or unsellable, you may be able to write off the value of the inventory as a business expense. However, there are specific accounting and tax rules that apply to this kind of deduction. Seek professional guidance to make sure improper write-offs don’t expose your business to compliance risks.
Do you know that different inventory valuation methods can impact your bottom line? Each of these common methods has a slightly different impact on cost of goods sold (COGS) calculations:
You can end up with different taxable income accounts, depending on the method you choose. Your tax advisor can help you compare the numbers. If your current valuation method isn’t the most tax-effective option, they’ll help you decide on a different approach to adopt in 2026.
Companies that use a cash basis for accounting can deduct accounts payable (AP) payments in the current year. If you’ve got the free cash flow, paying AP and even getting a jump on January’s bills can help lower your taxable income for 2025.
If lowering your 2025 taxable income will limit your working capital, it probably isn’t worth paying AP this year. Before you clear out AP, take a realistic look at your cash flow capabilities.
IRS rules for transactions between related parties require businesses to claim tax-deductible transaction expenses in the same year that the related party recognizes the income. These rules are complex, making related party transactions a frequent pitfall that can trigger IRS scrutiny and lead to penalties and interest. For consistent compliance, consult a qualified tax advisor who can help you navigate the rules around related party transactions.
Section 163(j) continues to limit the amount of business interest expense that many companies can deduct, making it essential to understand how the rules apply to your financing structure and year-end tax position. For 2025, most businesses remain subject to the 30% adjusted taxable income (ATI) limitation, which means highly leveraged companies — especially those facing rising borrowing costs — may see a portion of their interest expense disallowed and carried forward. With the return of more favorable depreciation rules under the OBBBA, ATI calculations may increase, giving some businesses greater room to deduct interest. At the same time, businesses engaged in real property trades or farming may still elect out of 163(j), though doing so requires using slower ADS depreciation for certain assets. As year-end approaches, evaluate whether restructuring debt, timing capital investments, or capitalizing eligible interest offers opportunities to manage your limitation exposure and reduce the amount of interest trapped on your balance sheet. Work closely with your tax advisor to identify the most cost-effective strategy tailored to your industry, leverage profile and future growth plans.
If you built a structure for your business or undertook a major remodeling project, you may be able to capitalize project-related interest expenses as part of the construction costs. This adds the interest expense to the overall cost basis of the building or improvement, potentially increasing allowable depreciation deductions and reducing your taxable income in future years.
Business interest expenses can add up, so finding a tax-efficient way to handle these costs has a meaningful impact on your profitability. Consult your tax advisor for help creating a strategy that will save you the most money possible under the updated tax laws.
Rather than capitalizing and depreciating expenses over several years, classifying expenditures as repairs may allow you to deduct the full cost in the year you incur the expense. This could include maintenance, repairs and similar activities that keep your property in good working condition.
Treating these expenses as ordinary and necessary business costs can help lower your tax bill and improve current-year cash flow by reducing your taxable income. Take care to properly classify the expenses as repairs under IRS rules before claiming a deduction.
The distinction between repairs you can deduct and amortizable capital expenses can be fuzzy. An experienced tax advisor can help you clarify which category your costs fall into so you can avoid IRS scrutiny.
Under the mileage method, you can deduct a standard amount of 70 cents per mile driven for business purposes in 2025. This rate is set annually by the IRS and includes costs like gas, maintenance and insurance. Most businesses choose the standard mileage method for its simplicity, but it isn’t necessarily the most beneficial option.
Alternatively, you may choose to use the actual expenses method — which involves deducting the actual costs of operating the vehicle for business purposes. This typically yields greater deductions but requires more recordkeeping and documentation.
Remember that using either method, these deductions come with specific rules and requirements. Always maintain detailed records of your mileage before claiming a tax break. If you opt for the actual expenses method, be sure to work with a qualified tax professional to help you avoid mistakes and prevent penalties.
There’s no limit on the amount of net operating losses (NOLs) a business can carry forward to future tax years. This creates the opportunity to take full advantage of any losses your company may have incurred. (Note that while the carryforward period is infinite, you can apply NOL amounts carried forward only up to 80% of a future year’s net income, and you must fully draw down NOLs in the order in which you incurred the losses.)
Proper record-keeping is a must; it’s easy to lose track of details and documents when you’re carrying forward NOLs over more than a year or two.
Reaching deep into diverse business activities, OBBBA introduces new opportunities along with risks that leaders must recognize and mitigate. While the legislation brings changes that affect every sector, companies in these industries should undertake a particularly diligent analysis of how OBBBA affects your business:
Industry-specific regulations often play a big role in your tax liability and knowing how to use them to your advantage can yield significant tax benefits. Here are a few ideas you may want to explore these and other potential tax strategies with your tax advisor. Bear in mind that working with industry specialists can help you uncover new ways to save money on taxes.
Year-end tax planning is a perennial challenge that becomes even more difficult — and more impactful — after major changes to the tax code. With the OBBBA reshaping the regulatory landscape, 2025 is a critical year for business owners to revisit their overall tax strategy in light of new rules. Discover how Armanino’s business tax consultants can help claim your share of the tax savings opportunities.
Get a free one-on-one consultation to assess your needs and next steps to help you reach your strategic tax goals.
