Pantana CPA Year-End Tax Strategy Guide

As 2025 winds down, the calendar isn’t the only thing counting down, your retirement timeline is too. The good news? You still have time before December 31 to make strategic moves that can reduce your tax bill and boost your long-term retirement savings.

At Pantana CPA, we know that year-end decisions can translate into thousands of dollars in tax benefits. Below are five powerful opportunities updated with the IRS’s 2025 inflation adjustments to help you finish the year strong.

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1. Establish Your 2025 Retirement Plan Before December 31

If you haven’t yet set up your business retirement plan, now is the time.

For many business owners, whether operating as a sole proprietor, an S-corporation, or a single-member business you can wear both hats: employer and employee. That dual status allows you to contribute in both capacities, dramatically increasing the amount you can deduct for 2025.

Why the December 31 Deadline Matters

To deduct 2025 employee contributions, your plan (such as a Solo 401(k)) must be established by December 31, 2025 even if the employer portion can be funded later, often up to your 2025 tax filing deadline.

2025 Employee Contribution Limits

If your business has a 401(k) plan in place by year-end, you can contribute:

• $23,500 if you’re under age 50
• $31,000 if you’re 50–59 or age 64+
• $34,750 if you’re 60–63

Total Combined Contribution Limits

(Employer + Employee)

• $70,000 if under age 50
• $77,500 if age 50–59 or 64+
• $81,250 if age 60–63

This makes the Solo 401(k) one of the most powerful tools available to owner-operators heading into year-end.

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2. Take Advantage of Up to $15,000 in Start-Up Retirement Plan Tax Credits

Not currently offering a retirement plan to employees? Establishing one before year-end could generate substantial tax credits.

Businesses with up to 100 employees may qualify for a non-refundable credit equal to:

• 100% of qualified plan start-up costs (for employers with ≤50 employees)
• Up to $5,000 per year, for three years → up to $15,000 total

“Qualified start-up costs” include administrative expenses and employee education related to the plan.

Important Eligibility Notes

You must have:

• At least one employee who is not a highly compensated employee
• No more than 100 employees earning $5,000 or more in the preceding year

Solo business owners don’t qualify because they’re always classified as “highly compensated employees.”

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3. Claim the Small Employer Pension Contribution Tax Credit (Up to $3,500 per Employee)

Beginning in 2023 under SECURE 2.0, small employers can now claim a brand-new credit for employer retirement contributions worth up to $1,000 per employee.

Credit Phases

For employees earning under $105,000 in 2025:

• Year 1: 100% of employer contribution (up to $1,000/employee)
• Year 2: 100%
• Year 3: 75%
• Year 4: 50%
• Year 5: 25%
• Year 6+: No credit

Example: Contributing $1,000 to 30 qualifying employees earns you a $30,000 tax credit in the first year alone.

Employers with 51–100 employees see their credit scaled down, and those with over 100 employees do not qualify.

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4. Add Automatic Enrollment and Receive Up to $1,500 in Credits

If your business introduces automatic enrollment to a qualifying retirement plan, you may receive:

• $500 per year
• For up to three years
• Totaling $1,500 in tax credits

The best part?
There is no required spending.
Simply implementing automatic enrollment triggers the credit.

Who Must Use Automatic Enrollment?

Most new 401(k) and 403(b) plans created in 2025 or later will be required to include it with exceptions, including:

• SIMPLE 401(k) plans
• Government and church plans
• Businesses less than 3 years old
• Businesses with 10 or fewer employees

Solo business owners with no employees do not qualify for this credit.

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5. Consider a Roth IRA Conversion Before Year-End

If you have a traditional IRA or 401(k), converting to a Roth IRA may be one of the most impactful long-term moves you can make, especially in market downturns or low-income years.

Why a Roth Conversion Can Be Powerful

• Pay tax now, enjoy tax-free qualified withdrawals later
• No required minimum distributions (RMDs) at age 73
• Contributions can be withdrawn tax- and penalty-free
• Converted funds can also be withdrawn tax-free (after 5 years)

However, you’ll owe tax on the conversion amount, so you must have cash on hand. Avoid using retirement funds to pay those taxes; doing so can trigger tax and penalties.

When a Conversion Makes Sense

A Roth may be advantageous if you:

• Experienced a business loss in 2025
• Expect to be in a higher tax bracket later
• Want to avoid mandatory withdrawals
• Plan to leave tax-free assets to heirs

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Key Takeaways from Pantana CPA

• Act before December 31 to establish your 2025 plan and maximize contributions.
• If you employ staff, explore three powerful credits:
  • Plan start-up credit
  • Employer contribution credit
  • Automatic enrollment credit
• Consider a Roth IRA conversion if it aligns with your tax situation and long-term retirement planning.

Year-end is one of the most valuable planning windows for business owners. If you’d like help choosing the right strategy or calculating how much you can save, Pantana CPA is here to help.

👉 [Schedule a consultation today] to plan your 2025 Year-End Tax Deductions