As December 31 approaches, now is the time for business owners to evaluate their tax strategy and confirm that their financial decisions align with year-end goals. This year brings a mix of legislative updates, shifting economic conditions, and planning opportunities that may affect your overall tax outlook. This blog highlights tax considerations, key deadlines, and practical steps you can take to position your business for a strong start in the new year.
Research and Experimental (R&E) Expenses
Beginning with tax years starting after December 31, 2024, domestic R&E costs are again immediately deductible, while foreign R&E must still be capitalized and amortized over 15 years. Transition relief allows eligible small businesses to deduct remaining unamortized domestic R&E expenses for 2022 through 2024. We can work with you to evaluate your activities, confirm eligibility, coordinate Section 280C considerations, and optimize the timing of elections.
Qualified Business Income (QBI) Deduction
The 20% QBI deduction is now permanent, with expanded phase-in ranges and a minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income. This may be an ideal time to reassess your entity structure and income levels to ensure you are positioned to benefit fully.
Capital Expenditures
“Bonus” depreciation is permanently reinstated at 100% for qualifying property acquired and placed in service on or after January 19, 2025. In addition, the Section 179 expensing limit has increased to $2.5 million. We can help you evaluate planned purchases, the timing of placed-in-service, and state conformity to maximize your deductions.
Clean Energy Incentives
Many clean energy benefits are scheduled to phase out in 2025 and 2026. If you are considering energy-efficient investments, we can help you determine how to secure the available incentives.
Information Reporting Thresholds
For 2025, the Form 1099-K threshold returns to $20,000 and 200 transactions per payee. The Form 1099-NEC/MISC threshold remains $600 for 2025 and rises to $2,000 in 2026, with future inflation indexing. Now is the time to confirm your vendor payment and reporting systems are aligned with current requirements.
Financial Statement Review
A clear picture of your income and expenses is essential for accurate year-end planning. This may involve updating your bookkeeping, reviewing projected transactions, and identifying opportunities before the year closes. We can assist with evaluating your financial statements and uncovering tax-saving strategies.
Business Meals
As holiday events approach, remember that some business meals qualify for a 100% deduction, depending on the circumstances. Proper categorization is essential to support allowable deductions.
Net Operating Losses (NOLs)
If your deductions exceed income, you may generate an NOL. In most cases, an NOL can offset income in other tax years but is limited to 80% of taxable business income annually. We can help determine how NOL rules apply to your situation.
Digital Assets and Virtual Currency
The IRS now broadly defines digital assets to include non-fungible tokens (NFTs) and virtual currencies. Beginning with 2025 transactions, new reporting rules apply, and you may receive Form 1099-DA in early 2026. Even without a form, you are responsible for reporting all taxable digital asset activity. Maintaining thorough records is essential as IRS scrutiny increases. Contact us if you need assistance with reporting or recordkeeping.
Additional Considerations
- Employee Retention Credit (ERC): We can help you monitor outstanding claims or examinations.
- Charitable Contributions: For 2025, corporate deductions are capped at 10% of taxable income, shifting to 0.5% in 2026. Flow-through entities may have separate limitations.
- Business–Owner Transactions: Loans, distributions, and compensation require proper structuring to avoid unintended tax consequences.
- Partnership Audit Rules: Many partnerships are still navigating the complexities of the centralized audit regime; planning now can prevent unfavorable outcomes.
- State and Local Tax (SALT) Issues: We can assist with nexus, sourcing, elective taxes, sales/use, and franchise tax considerations.
- Disaster Preparedness: This is an ideal time to review your financial and operational continuity plans.
- Retirement Plans: Recent legislation offers new opportunities to enhance retirement benefits and deductions.
- Employee vs. Independent Contractor: Proper classification is essential to avoid penalties.
- Estimated Tax Payments: Adjustments now can help manage cash flow and minimize unexpected liabilities.
As the year draws to a close, proactive planning can help minimize surprises and support stronger financial outcomes. Our team is dedicated to helping you navigate these updates and make thoughtful decisions tailored to your goals. To schedule a personalized year-end review, contact your Stephano Slack tax manager or partner at 610-687-1600 or TaxInfo@StephanoSlack.com.
Author: Jackie Himes, CPA, Partner, is a trusted advisor to high-net-worth individuals and closely held businesses, providing strategic guidance that drives growth and long-term sustainability. She can be reached at 610-710-4057 or Jhimes@stephanoslack.com.
Disclaimer: This communication is for informational purposes only and does not constitute professional advice.
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