Following major tax legislation passed in July 2025 (the One Big Beautiful Bill Act, or OBBBA), business owners have significant new tax-planning opportunities for the end of the year. Reevaluating retirement contributions, strategically timing income, RSU timing, Roth conversions and charitable gifting are all effective strategies to lower the tax bill.
To make the most of these tax opportunities, it’s smart for owners to consult with a wealth advisor with experience in helping business owners. At FSA Wealth Partners, we utilize our FSA Get Wealth Planning Process™ to assist wealth-building business owners in navigating a clear path toward the lifestyle and legacy they’ve worked hard to achieve.
Let’s take a look at various strategies you could utilize to save tax dollars this year.
Timing RSUs and Bonuses: True-up the Tax Bite
For tax planning, the key issue with restricted stock units (RSUs) and bonuses is that the standard withholding rate may be too low for high-income earners, potentially leading to a large tax bill and underpayment penalties at the end of the year.
Performing a year-end “true-up” involves calculating your actual tax liability on this income and adjusting your withholding or making estimated payments to cover any shortfall. Both bonuses and RSUs are considered “supplemental wages” by the IRS and are taxed as ordinary income when they are paid or when the RSUs vest. A large RSU vest can significantly spike your income in a single year, pushing you into a higher tax bracket and exacerbating the withholding shortfall. Here are some steps to take:
- Project your total income. Add up all your sources of income for the year, including annual salary, bonuses, the FMV of all vested RSUs and other income.
- Estimate your total tax liability. Calculate your estimated federal, state, and local taxes using your total projected income for the year.
- Review your total withholdings. Look at the withholdings shown on your pay stubs and RSU vesting statements. Sum up all federal, state, and local taxes already taken out for the year.
- Calculate the shortfall. Subtract your total withholdings from your estimated total tax liability. A positive number is your tax shortfall—the amount you need to pay before the end of the year.
Plan Retirement Contributions
Contributing to retirement plans is an effective way to lower taxable income while saving for the future. Payroll contributions are tax-deductible for the owner-employee, while the company match, Safe Harbor, and profit-sharing contributions are all business-income deductible.
- SEP IRA or solo 401(k): Self-employed individuals can contribute up to 25% of their income to a SEP IRA. A solo 401(k) works similarly to a multi-person 401(k) and could be appropriate for high-earning consultants and solo practitioners.
- Max out 401(k): Business owners with a 401(k) plan should aim to maximize both employee and employer contributions before the end of the year. Maximum contributions to both SEP IRAs and 401(k)s is $70,000 of payroll deferral and employer contributions.
- SECURE Act 2.0 changes: In 2025, the regular catch-up contribution limit for employees over 50 is $7,500. Additionally, those aged 60 to 63 can make a higher catch-up contribution of $11,250.
Strategically Time Income and Expenses
- Timing is key: Consider accelerating deductible expenses into 2025 and deferring income into 2026 to lower your 2025 tax bill. This is especially advantageous if you expect to be in the same or a lower tax bracket next year.
- Prepay expenses: You can prepay certain expenses (e.g., business insurance, subscriptions, rent) before the end of the year to accelerate the deduction.
- Defer income: Cash-basis businesses can delay invoicing clients until January 2026 to postpone paying taxes on that income.
Charitable Bunching With DAFs and QCDs for 70½+
An effective method to lower taxable income in 2025 is called “bunching,” where a taxpayer combines multiple years’ worth of deductions into a single tax year. The taxpayer then “itemizes” instead of taking the standard deduction. In subsequent years, the standard deduction is used.
Charitable bunching with a donor-advised fund (DAF) is a similar tax strategy that involves consolidating several years’ worth of charitable donations into a single year to maximize tax deductions. The DAF acts as a holding account, allowing you to donate a large lump sum and claim the tax benefit up front, while distributing the funds to charities gradually over time.
Alternatively, a qualified charitable distribution (QCD) allows individuals aged 70½ and older to donate money directly from an IRA to an eligible charity, tax-free. QCDs offer a tax-efficient way to support philanthropy, particularly for those who take the standard deduction. Those who are subject to take required minimum distributions (RMDs) can use this method to offset otherwise taxable RMDs up to $108,000 per person in 2025.
If Taxable Income Is Lower in 2025, Consider a Roth Conversion
A Roth conversion is the process of moving money from a traditional retirement account (like a 401(k) or traditional IRA) into a Roth IRA. To complete the conversion, you pay income tax on the amount converted in the year of the transaction, but future qualified withdrawals from the Roth IRA are tax-free. This is often done to pay taxes at what may be lower current rates, to benefit from tax-free growth later, and to lower RMDs from the traditional IRA or 401(k) account in retirement.
A conversion may be ideal in a year when your income is lower than usual, potentially placing you in a lower tax bracket. If you believe future tax rates will be higher than today’s rates, converting now locks in a lower tax rate for the converted amount.
It’s Time to “Harvest” Capital Losses to Offset Gains
Tax-loss harvesting is a strategy that involves selling investments at a loss to offset capital gains and potentially reduce your tax bill. It’s a way to turn market volatility into a tax benefit, helping enhance after-tax returns. To do so, an investor sells an underperforming asset for less than the purchase price. This “realizes” a capital loss for tax purposes. The realized capital loss is used to offset any capital gains from other investments.
Excess losses up to $3,000 may be deducted against other ordinary income and further losses can be carried forward to future tax years. Beware of the “wash-sale” rule, which prohibits repurchasing the losing investment (or similar one) within 30 days before or after the sale. Doing so negates the use of the loss to offset gains.
We Can Assist With Your 2025 Year-End Tax Planning
Choosing and implementing the many and complex tax strategies available comes with a lot of important choices that can impact your retirement finances and tax planning. The good news? You don’t have to figure it out on your own.
At FSA Wealth Partners, we work with our clients and allied professionals step by step, implementing strategies and techniques that fit their needs and financial goals. Our focus is on giving clients the clarity and confidence to make decisions that align with what truly matters to them. Even as markets, the economy, or policies shift, we provide ongoing guidance to keep your financial priorities on track.
To learn more about how we can support you or to schedule a meeting, call (301) 949-7300 or email jim@FSAwealthpartners.com.
About Jim
James Joseph, CFP®, is the President and Partner of FSA Wealth Partners (FSA), a financial services firm in Rockville, MD, with over 40 years of experience helping individuals, families, and business owners navigate the complexities of wealth management. Since joining FSA in 2004, Jim has been passionate about guiding clients with personalized financial and investment advice, simplifying complex financial topics, and providing tailored solutions—especially for those approaching or enjoying retirement.
Jim takes pride in the FSA Safety Net®, a unique strategy designed to help clients avoid major losses during market downturns. His belief that “you win by not losing” underscores FSA’s proactive approach to preserving wealth while still seeking growth. By focusing on risk management and using the FSA Safety Net®, Jim works to prevent small losses from becoming significant setbacks, keeping his clients’ goals intact. Jim emphasizes the importance of both active management and comprehensive financial planning.
Jim began his financial career in 1997, gaining experience at Charles Schwab and Morgan Stanley, where he crafted retirement strategies and managed portfolios. His extensive background, combined with his genuine dedication to helping clients reach their financial goals, has made him a trusted advisor. He particularly enjoys seeing clients succeed when they embrace his advice and transition smoothly into retirement, believing that starting early and leveraging the power of compounding can unlock future financial flexibility.
Jim holds a bachelor’s degree in Finance from West Virginia University, the CERTIFIED FINANCIAL PLANNER® designation, and over the years has shared his financial knowledge in publications such as The Wall Street Journal and Reader’s Digest. When not at work, Jim enjoys spending time with his three daughters, playing ice hockey, and cheering on his beloved Pittsburgh Penguins and Steelers. He’s also into aviation, working toward his private pilot’s license. To learn more about Jim, connect with him on LinkedIn.
FSA’s current written Disclosure Brochure and Privacy Notice discussing our current advisory services and fees is available at www.fsawealthpartners.com/disclosures or by calling 301-949-7300.
