Time is running out to make 2025 count toward your future retirement savings. With year-end approaching, a few timely steps can help you reduce taxable income, earn valuable credits, and strengthen your long-term financial position. Here’s where to focus before the year closes.
The 2025 OBBBA rules expand tax-advantaged retirement opportunities. Business owners can claim start-up and contribution credits, earn up to $15,000 in tax savings, and contribute up to $81,250 through a solo 401(k). Roth conversions add tax-free growth potential, making year-end planning more critical than ever.
1. Establish Your 2025 Retirement Plan
If you haven’t already set up your 2025 retirement plan, act now. Even sole proprietors and single-member corporations can open a plan before December 31 and claim both employee and employer contributions.
For example, if you’re a one-owner S corporation with a solo 401(k), you can contribute:
Up to $23,500 if under age 50.
Up to $31,000 if between ages 50–59 or age 64+.
Up to $34,750 if between ages 60–63.
Employer contributions can reach 25% of compensation, made by the tax filing date (March 15, 2026, or September 15 with an extension). Combined contributions can reach up to $81,250 depending on age and earnings.
2. Claim the Retirement Plan Start-Up Credit
Business owners can claim up to $15,000 over three years for establishing a new qualified plan such as a 401(k), SEP, SIMPLE, or defined benefit plan.
Eligible employers with 50 or fewer employees may receive a credit equal to 100% of start-up costs, while those with 51–100 employees can receive 50%. Expenses include plan setup, administration, and employee education.
If you joined a multi-employer plan after 2019 but didn’t claim this credit, you may amend open-year returns to recover missed savings.
3. Take Advantage of the New Employer Contribution Credit
Starting in 2025, small employers can claim a new tax credit of up to $1,000 per employee for contributions made to retirement accounts.
Credits are phased out gradually over five years:
100% in year 2,
75% in year 3,
50% in year 4,
25% in year 5.
The credit is unavailable once an employee earns more than $105,000 in wages.
4. Use the Auto-Enrollment Credit
Adding an automatic enrollment feature to your 401(k) or SIMPLE IRA plan can earn an additional $500 per year for up to three years.
This feature boosts participation and applies to most new plans starting in 2025. Even existing plans can qualify by adding automatic enrollment.
Solo businesses with no employees don’t qualify for this credit, but multi-employee firms can benefit significantly.
5. Consider Converting to a Roth IRA
For those expecting higher tax rates in the future, converting to a Roth IRA may offer lasting benefits. Though conversions are taxable now, future withdrawals of contributions and qualified earnings are tax-free and penalty-free after five years.
Other benefits include:
No required minimum distributions (RMDs) at age 73.
Tax-free inheritance for heirs.
Flexibility to manage tax exposure during retirement.
Avoid using existing IRA funds to cover conversion taxes — doing so could trigger income taxes and penalties.
Takeaway
Strategic retirement planning isn’t just about saving - it’s about timing. Establish your 2025 plan, claim every credit available, and consider whether a Roth conversion fits your long-term strategy. Every move made before December 31 can translate into measurable, compounding tax savings.