As 2025 winds down, high-income and high-net-worth individuals face one of the most consequential tax planning years in more than a decade. The One Big Beautiful Bill Act (OBBBA) reshaped the landscape for income, estate, and gift taxes and locked in many provisions previously set to expire in 2025 and introducing new limitations and opportunities beginning in 2026. Additionally, the Tax Cuts and Jobs Act (TCJA) marginal income tax rates were made permanent, allowing for more stable rate assumptions for long term tax planning.
This creates a unique window for strategic, defensible year-end planning, one that may not come again soon. Below is a comprehensive roadmap to help you prepare proactively before December 31, 2025.
Build a Clear 2025 Tax Baseline
Effective tax planning begins with clarity. Before making any year-end moves, individuals should work with their advisors to assemble a pro forma 2025 tax projection. A forward-looking return highlights:
- Expected taxable income and brackets;
- Potential exposure to capital gains, Net Investment Income Tax (NIIT), and/or Alternative minimum Tax (AMT);
- Whether itemizing or taking the standard deduction will be more advantageous; and/or
- Opportunities to accelerate deductions or defer income.
This baseline becomes the foundation for determining which strategies—charitable giving, gain or loss harvesting, Roth IRA conversions, gifting, or compensation elections—make the most sense before year-end.
For context on how 2026 inflation adjustments interact with OBBBA, see our guide.
Plan Around Investment Gains and Charitable Giving
Thoughtful Tax-Loss Harvesting
Even in strong market years, volatility creates opportunities to recognize losses that can offset realized or future capital gains. Investors can:
- Realize losses to offset gains dollar-for-dollar;
- Use up to $3,000 in unused losses against ordinary income; and
- Carry forward remaining losses indefinitely
One essential rule is the wash-sale rule, which disallows losses if you repurchase a substantially identical security within 30 days before or after the sale. Some investors avoid this by “doubling up”—purchasing new shares today, then waiting more than 30 days before selling the original lot. This rule also applies to RSUs and other stock options with regular vesting schedules.
While year-end harvesting gets the most attention, systematic loss harvesting throughout the year can offer better long-term outcomes, particularly for highly appreciated portfolios.
Charitable Contributions: Why 2025 Matters
Under OBBBA, major charitable deduction changes begin in 2026, including:
- A 0.5% Adjusted Gross Income (AGI) reduction for itemized charitable deductions;
- A 35% cap on the tax value of deductions for top-bracket taxpayers
This means a charitable gift made in 2025 is more valuable than an identical gift made next year.
Strategies for 2025 include:
- Accelerating gifts intended for early 2026 or 2027;
- Bunching contributions to maximize deductibility; and/or
- Using donor-advised funds if you want the deduction now and flexibility later. Additionally donor-advised funds can double up the tax benefit if long term highly appreciated stock is gifted to the fund. This avoids the long term capital gain tax and allows for a deduction of the current fair market value of the shares.
Charitable timing is one of the clearest and most impactful tax planning tools available this year.
Manage Cash Flow, Estimated Taxes, and Retirement Opportunities
Safe Harbor Planning for Estimated Taxes
Taxpayers who expect higher income in 2025 can reduce penalty exposure by using the IRS safe harbor rules. You can avoid estimated tax penalties if you pay the lower of:
- 110% of your 2024 tax liability, or
- 90% of your 2025 projected liability
With short-term Treasury yields still elevated, many taxpayers are paying based on their 2024 liability and investing the difference in principal-protected fixed-income until the final 2025 settlement.
Be aware that state laws may differ; for example, California does not allow the prior year safe harbor method if your income is $1,000,000, therefore taxpayers are required to use the 90% of current year method.
Maximize 2025 Retirement Account Contributions
Contribution limits for 2025 include:
- IRAs: $7,000 (plus a $1,000 catch-up for age 50+)
- 401(k)/403(b): $23,500 ($7,500 catch-up for age 50-59, or 64+)
- Enhanced catch-up contributions up to $34,750 for individuals ages 60–63
Roth conversions may also be advantageous in 2025 if:
- You have lower income in 2025 or have dropped into a lower tax bracket;
- You expect higher future tax rates;
- You can pay the conversion tax from non-retirement funds;
- You plan to hold the account long-term; and/or
- You do not intend to leave IRA assets to charity
Read more on how OBBBA reshaped retirement rules.
Required Minimum Distributions and Inherited IRAs
Individuals age 73 and older must take required minimum distributions (RMDs) by December 31. Qualified charitable distributions (QCDs) can satisfy RMDs if made directly from an IRA to a public charity, though other strategies—such as gifting appreciated securities—may be more tax-efficient depending on personal goals.
For inherited IRAs (post-2019), new regulations require certain beneficiaries to take annual distributions beginning in 2025 as part of the 10-year withdrawal rule. Personalized guidance is essential to avoid costly penalties.
Compensation, Equity, and New OBBBA Provisions
Electing Nonqualified Deferred Compensation
Employees with access to nonqualified deferred compensation (NQDC) plans typically must elect to defer their 2026 income by December 31, 2025. Deferral reduces current taxable income but introduces new risks because the deferred compensation becomes an unsecured liability of the employer.
Evaluate factors such as:
- Expected tax bracket in 2026;
- Strength and stability of your employer; and
- Anticipated liquidity needs
Stock Option Planning
Year-end is a meaningful checkpoint for evaluating employer stock options. Common cases where exercise may make sense include:
- Options nearing expiration;
- Options tied to high-dividend-paying shares; and
- Exercising ISO holdings up to your AMT breakeven point
A cost-benefit analysis—evaluating tax timing, holding periods, and long-term strategy—is essential to making a defensible decision.
Business Owners
Qualified Business Income (QBI) Deduction: The 20% deduction for eligible non-corporate taxpayers from pass-through businesses (partnerships, S corporations, and sole proprietorships) is now a permanent part of the tax code.
Business Expensing: Key business incentives were made permanent, including 100% bonus depreciation for eligible property placed in service after January 19, 2025 (before phasing down), and the immediate expensing of domestic research and development (R&E) expenditures.
Higher State and Local Tax (SALT) Deduction Limits
In 2025, individuals with AGI under $500,000 will have a temporary increase in the state and local tax (SALT) deduction cap from $10,000 to $40,000. This increase is effective for years 2025 -2029. Individuals that meet this income limitation should consider:
- Pre-paying Q4 estimates (due 1/16/2025) by December 31st 2025 to take the deduction this year
- Pre-pay property taxes before December 31st to take that deduction this year
New Individual Deductions Starting in 2026
Beginning in 2026, OBBBA introduces new deductions, including:
- Tip income deduction;
- Overtime income deduction;
- Social Security-related deduction; and
- Auto loan interest deduction (capped at $10,000 with phaseouts)
Understanding these provisions can inform whether certain income should be recognized in 2025 or deferred into 2026.
Gifting, Estate, and Trust Strategies for a Higher-Exemption Landscape
Lifetime and Estate Exemptions Increase in 2026
The federal gift, estate, and GST exemption increases to $15 million per person in 2026 (up from $13.99 million in 2025), indexed for inflation.
Planning opportunities include:
- Using remaining exemption in 2025 to lock in current capacity;
- Transferring appreciating assets to remove future growth from the estate; and
- Leveraging valuation discounts on closely held business interests
Even though the exemption is now “permanent,” legislative risk remains, making proactive planning prudent.
Annual Exclusion Gifting
For 2025 and 2026, individuals may gift:
- $19,000 per recipient;
- $38,000 for married couples
These gifts are use-it-or-lose-it and cannot be applied retroactively. Annual exclusion gifts often fund 529 plans, which offer tax-free growth when used for qualified educational expenses.
SALT and QSBS Planning Using Non-Grantor Trusts
OBBBA temporarily increases the state and local tax (SALT) deduction cap from $10,000 to $40,000 in 2025, with phase-downs for higher-income households (households with MAGI over $500,000). Because each non-grantor trust receives its own deduction cap, strategic trust planning may multiply the available benefit. The cap will be increased 1% annually through 2029.
Similarly, the qualified small business stock (QSBS) exclusion increases to $15 million per issuer in 2026. Gifting QSBS to separate non-grantor trusts can expand the total exclusion available to a family.
Factors to evaluate carefully:
- State anti-ING (Incomplete Gift Non-Grantor) trust laws;
- The multiple trust rule under IRC §643(f); and
- Clear documentation and purpose beyond tax minimization
Read our detailed discussion of QSBS planning
Bringing It All Together With Your Advisory Team
Year-end tax planning in 2025 demands coordination across income, investments, retirement, charitable goals, and estate structure. With major OBBBA provisions changing in 2026, the decisions made before December 31 can materially impact your long-term financial outcomes.
Aura Advisors approaches planning with a commitment to innovation, defensibility, security, and empathy. Thoughtful, proactive planning today can enhance tax efficiency, strengthen financial resilience, and support your long-term goals.