Top mid-year tax reduction strategies for 2025 

The pass-through entity (PTE) tax continues to be a powerful planning tool for business owners and it's becoming even more valuable in 2025. With the new law temporarily raising the state and local tax (SALT) deduction cap from $10,000 to $40,000 (for those married filing jointly) subject to certain income thresholds, electing to pay state income taxes at the entity level could result in substantial savings. Those married filing separately may deduct up to $20,000. 

Starting in 2026, high-income taxpayers in the top 37% tax bracket will face a 2% cut on their total itemized deductions. That makes 2025 an ideal year for front-loading deductible expenses. To help with this, consider accelerating payments for charitable contributions, mortgage interest, large medical bills, and other itemized deductions. Making these payments before December 31, 2025, could preserve your ability to fully deduct them under current rules. 

Charitable giving rules are also changing. Beginning in 2026, taxpayers who itemize will face a new 0.5% AGI floor, effectively making only 95% of their charitable donations deductible. 

To maximize the impact of your giving, consider making larger donations in 2025. Ensure contributions are check-dated or charged to a credit card before year-end. If possible, donating appreciated stock may provide a double benefit, giving you a deduction for the full fair market value while avoiding capital gains tax. 

Good news for practice administrators: the threshold for filing Forms 1099-MISC and 1099-NEC will increase from $600 to $2,000 in 2026. This change means fewer contractors will require 1099s, reducing administrative overhead. Plus, the new threshold will be adjusted annually for inflation. 

Don’t wait until December to start thinking about your retirement plan contributions. In 2025, dental practice owners can defer up to $23,500 into a 401(k)—or $31,000 if age 50 or older. In addition to deferrals, a profit-sharing contribution of up to $70,000 can be made by March 15 or by September 15 if filing an extended corporate tax return. If you're looking to supercharge your savings, explore a defined benefit/defined contribution combo plan, which could allow for up to $200,000 in total contributions. 

Tax credits remain one of the most powerful tools for reducing tax liability. Federal credits like the Work Opportunity Tax Credit can be worth up to $9,600 per eligible hire. If your state’s standard deduction is lower than the federal amount, you may want to explore paying additional state tax to unlock further benefits. Additionally, paying a spouse enough to fully fund their 401(k) deferral could boost household retirement savings even more.