Tax Planning for the Upcoming Year: A Quick Guide

Written by: Andre Paiva, CRPC
April 15, 2025

As the tax season is ending, individuals and businesses should start thinking about implementing tax planning strategies to maximize savings and ensure compliance with the latest tax laws for next year’s filings. Effective tax planning involves reviewing income, deductions, credits, and retirement contributions to reduce tax liabilities and increase financial security. We will explore on a high level, a couple of key tax planning strategies for individuals and businesses to help better prepare for the upcoming tax season.

Understanding the Importance of Tax Planning

Tax planning is not just about reducing tax payments; it’s about making informed financial decisions that align with your short-term and long-term financial goals. A well-planned tax strategy can help:

Lower taxable income
Maximize tax deductions and credits
Defer income to future years when possible
Avoid potential penalties and interest charges
Optimize retirement and investment contributions

Tax Planning Strategies for Individuals

Maximize Retirement Contributions

Contributing to tax-advantaged retirement accounts such as a 401(k), IRA, or Roth IRA can help lower your taxable income. For 2025, the contribution limits for retirement accounts have increased:

401(k) contribution limit: $23,500 ($31,000 for those aged 50 and above)¹
IRA contribution limit: $7,000 ($8,000 for those aged 50 and above)¹
- IRA contributions remained unchanged from 2024 figures

Maximizing contributions to these accounts reduces your taxable income and helps provide long-term savings for retirement.

Take Advantage of Tax Credits

Tax credits reduce tax liability dollar for dollar. Common tax credits to consider include:

Child Tax Credit: Up to $2,000 per qualifying child
Earned Income Tax Credit (EITC): Available to low-to-moderate-income earners
American Opportunity Tax Credit (AOTC): Up to $2,500 for qualified higher education expenses
Energy Efficiency Credits: For installing energy-efficient home improvements such as solar panels and energy-efficient appliances.

Harvest Tax Losses

Tax-loss harvesting involves selling underperforming investments to offset capital gains. If capital losses exceed gains, up to $3,000 of the loss can be deducted against ordinary income ($1,500 for married individuals filing separately)². This strategy can help reduce overall tax liability while maintaining an investment portfolio.

Review Charitable Contributions

Donating to qualified charitable organizations can result in tax deductions. Consider donating appreciated stock instead of cash to maximize tax benefits. Individuals who do not itemize deductions may still benefit from a qualified charitable distribution (QCD) directly from their retirement accounts if they are 70½ years or older. This strategy can also help clients reduce their Required Minimum Distribution amount for the year.

Optimize Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs)

HSAs and FSAs allow individuals to set aside pre-tax money for medical expenses. Contribution limits for 2025 include:

HSA: $4,300 for individuals and $8,550 for families ($1,000 additional for those 55 and older)³
FSA: $3,300 per employee

Maximizing contributions to these accounts reduces taxable income and provides funds for future healthcare expenses.

Adjust Withholding and Estimated Tax Payments

Individuals who experienced a significant change in income, marriage status, or dependents should review their tax withholding to avoid unexpected tax bills. Self-employed individuals and those with additional income sources should ensure they are making adequate estimated tax payments throughout the year in order to avoid underpayment and potential costly penalties.

Tax Planning Strategies for Businesses

Take Advantage of Business Deductions

Businesses should maximize deductible expenses, including:

Office supplies and equipment
Business travel and meals (50% deduction for meals)
Home office expenses
Salaries and wages
Employee benefits and retirement contributions

As a business owner, it is important to remember that proper record-keeping is necessary to support deductions and reduce taxable income.

Leverage Section 179 and Bonus Depreciation

Businesses can accelerate depreciation deductions on qualifying equipment purchases through Section 179 and bonus depreciation. The Section 179 deduction limit for 2025 is $1,250,000, allowing businesses to deduct the full cost of equipment in the year of purchase rather than depreciating it over time⁴. It is important to note that the Section 179 deduction begins to phase out on equipment purchases exceeding $3,130,000⁴.

Consider Entity Structure for Tax Efficiency

The choice of business entity impacts taxation. S Corporations, LLCs, and C Corporations have different tax implications:

S Corporations: Pass-through taxation avoids double taxation
LLCs: Flexible taxation options
C Corporations: Subject to corporate tax rates but may offer benefits for retained earnings and fringe benefits

Business owners should consult tax professionals to determine the most tax-efficient way to structure their businesses.

Plan for Employee Benefits and Retirement Plans

Offering employee benefits such as health insurance, retirement plans, and profit-sharing can reduce taxable income while attracting and retaining top talent. Contributions to qualified retirement plans, such as a SEP IRA or 401(k), are deductible and provide long-term tax advantages.

Take Advantage of Tax Credits

Businesses can reduce tax liability through various credits, including:

Research & Development (R&D) Tax Credit
Work Opportunity Tax Credit (WOTC)
Small Business Health Care Tax Credit
Energy Efficiency Credits

These credits provide significant savings for businesses investing in innovation, employment, and sustainability.

Defer Income and Accelerate Expenses

If cash flow allows, businesses can defer income to the following year while accelerating deductible expenses before year-end. This strategy is particularly useful for businesses using the cash accounting method.

Ensure Compliance with Tax Law Changes

Tax laws change frequently, affecting deductions, credits, and filing requirements. Businesses should stay updated on new tax regulations and work with tax professionals to maintain compliance and optimize tax savings.

Key Tax Deadlines for the Upcoming Year

January 15: Fourth quarter estimated tax payments due
April 15: Individual tax returns (Form 1040) and first quarter estimated tax payments due
March 15: Partnership and S Corporation tax returns due
April 15: C Corporation tax returns due
October 15: Extended tax return deadline for individuals and businesses

Conclusion

Effective tax planning requires careful analysis of income, deductions, credits, and investments. By implementing the strategies outlined in this quick guide, individuals and businesses can help reduce their tax liabilities, maximize savings, and ensure compliance with tax laws. Consulting with a tax professional can provide personalized guidance and help navigate the complexities of tax planning for the upcoming year. Start planning early to take advantage of every available opportunity to minimize taxes and secure financial well-being.

Written by,

Andre Paiva

Andre joined Insight Wealth Strategies in 2018 and works as an Associate Advisor on our Advisory team creating financial plans and implementing investment management strategies for our clients. He holds a Bachelor’s degree in Business Management from University of Phoenix, he has previously passed his Series 7 and 66 licenses as well as CA life and health insurance, and is a notary public.

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Sources:

Insight Wealth Strategies, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Insight Wealth Strategies, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Insight Wealth Strategies, LLC unless a client service agreement is in place.

Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.