Smart Tax Moves Before Year-End: What Connecticut Business Owners and Families Should Know 

As we look to close out 2025, the window to implement strategic tax planning is narrowing rapidly. With tax law changes taking effect next year against the backdrop of Connecticut’s unique tax landscape, understanding your options before December 31 can significantly impact your financial future.  

Why 2025 Is a Critical Year  

Tax laws are changing in 2026, making this year-end particularly important for planning. New charitable giving limitations begin in 2026, including a 0.5% adjusted gross income floor and a 35% deduction cap for high earners. Connecticut’s estate tax exemption increases to $15 million in 2026, and several business tax strategies must be implemented by year-end to capture 2025 benefits. 

What Makes Connecticut’s Different 

Connecticut is one of only 12 states with an estate tax, and the only state with a gift tax. For 2025, Connecticut imposes a flat 12% estate tax on estates exceeding $13.99 million per person. The combined federal and state rate can reach 47.2%.  

Here’s the catch: Connecticut doesn’t offer portability between spouses. When one spouse dies, any unused portion of their exemption is lost forever. This makes proper planning essential for married couples. However, you can make annual exclusion gifts of $19,000 per recipient in 2025 ($38,000 for married couples) without affecting your lifetime exemption. 

Smart Year-End Tax Strategies for Business Owners  

Make equipment purchases count. Planning to buy equipment, vehicles, or technology? Section 179 expensing allows businesses to deduct up to $1.25 million in qualifying purchases for 2025, but only if you buy and place assets in service before December 31.  

Don’t miss the Connecticut Pass-Through Entity (PTE) tax deduction. Connecticut business owners can pay state income tax at the entity level and receive a federal tax deduction for it, bypassing the $10,000 State and Local Tax (SALT) cap. Payment must be made before December 31, 2025 to claim this deduction.  

Max out retirement contributions. For 2025, you can contribute up to $23,000 to a 401(k), plus $7,500 if you’re 50 or older. Business owners have even higher limits with Simplified Employee Pension (SEP) IRAs (up to $70,000). Important: 401(k) plans must be established by December 31 to deduct 2025 contributions.  

Time your income and expenses strategically. Consider accelerating deductible expenses into 2025, like prepaying insurance premiums, rent, or subscriptions for up to 12 months. This provides immediate tax benefit. 

Smart Moves for Families  

Give to charity now, not later. Starting in 2026, charitable giving gets more complicated. The first 0.5% of your income won’t be deductible, and high earners will see their deduction benefit drop by about 10%. If you’re planning significant charitable contributions, make them before year-end.  

The QCD strategy for retirees. If you’re 70 1/2 or older, Qualified Charitable Distributions (QCDs) are incredibly tax-efficient. You can transfer up to $108,000 directly from your IRA to charity, satisfying your required minimum distribution while avoiding taxes. Unlike regular charitable deductions, QCDs won’t be affected by the 2026 restrictions.  

Use your annual gift exclusion. You can gift $19,000 per person (or $38,000 as a couple) to as many people as you want without triggering Connecticut’s gift tax or using your lifetime exemption. These gifts reduce your estate while supporting family members.  

Consider strategic estate planning techniques. Spousal Lifetime Access Trusts (SLATs) and Irrevocable Life Insurance Trusts (ILITs) can remove assets from your taxable estate while still providing family benefits. These require professional guidance but can save substantial estate taxes.  

Don’t Forget These Quick Wins  

• Harvest investment losses to offset gains and reduce taxes  

• Max out your Health Savings Account if you have a high-deductible health plan ($4,300 individual / $8,550 family for 2025)  

• Review your estimated tax payments to avoid penalties. Fourth quarter payment is due January 15, 2026  

• Update your estate planning documents to ensure they optimize Connecticut’s estate tax exemption  

What Not to Do  

Avoid these common mistakes:  

• Don’t make financial decisions solely for tax reasons. Strategy should drive decisions, not just tax savings 

• Complex strategies need time to implement. Get started now if you haven’t already. 

• Don’t ignore Connecticut’s unique tax implications when planning 

• Don’t forget that some tax savings now might cost you more later. Rember to think long-term.  

Your Year-End Action Plan  

The biggest takeaway? Don’t wait. Year-end tax planning requires time for analysis and implementation. Here’s what to do now:  

1. Schedule a review of your 2025 tax situation with your advisors 
2. For business owners: evaluate equipment purchases, retirement contributions, and PTE tax payments 
3. For families: consider accelerating charitable giving and maximizing annual gift exclusions 
4. For retirees: explore QCDs as your charitable giving strategy 
5. Review estate planning documents to ensure they work with Connecticut’s tax rules

When legal matters, timing matters too. Strategic planning now can save thousands in taxes while positioning you for long-term financial success.  

Are you ready to make the most of your year-end tax opportunities? Our experienced business and estate planning team provides straightforward guidance on tax optimization strategies, charitable giving, and wealth transfer planning throughout eastern and central Connecticut. We help business owners and families implement strategies that make sense for their situation. Contact The Prue Law Group today at (860) 423-9231 or visit pruelawgroup.com to schedule a consultation before year-end. 

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Sources: 

Taxfyle. “Maximizing Your Small Business Tax Benefits: 2025 Tax Year Strategies & New Reporting Changes.” March 5, 2025. https://www.taxfyle.com/blog/maximizing-your-small-business-tax-benefits 

Paychex. “Small Business Tax Planning: 14 Ways To Save on Taxes in 2025.” https://www.paychex.com/articles/payroll-taxes/tax-saving-tips-at-year-end 

Cain Watters CPAs. “Year-End Tax Planning Considerations for 2025.” November 2025. https://www.cainwatters.com/digitalblogs/2025-year-end-tax-planning/ 

CLA. “Essential Year-End Business Tax Planning Strategies for 2025.” https://www.claconnect.com/en/resources/articles/25/year-end-business-tax-planning 

Fuchs Financial. “2025 Connecticut Estate-Tax Survival Guide.” May 23, 2025. https://www.fuchsfinancial.com/2025-ct-estate-tax/ 

Connecticut Department of Revenue Services. “Estate and Gift Tax Information.” https://portal.ct.gov/drs/individuals/individual-income-tax-portal/estate-and-gift-taxes/tax-information 

Charles Schwab. “Reducing RMDs With QCDs in 2025 and 2026.” https://www.schwab.com/learn/story/reducing-rmds-with-qcds 

Fidelity Charitable. “Qualified Charitable Distribution.” https://www.fidelitycharitable.org/guidance/philanthropy/qualified-charitable-distribution.html 

LSL CPAs. “Upcoming Limits to Charitable Contributions.” July 31, 2025. https://lslcpas.com/upcoming-limits-to-charitable-contributions-why-2025-is-a-critical-year-for-giving/ 

Journal of Accountancy. “How OBBBA alters charitable deduction strategies for 2025 and 2026.” October 2025. https://www.journalofaccountancy.com/newsletters/pfp-digest/how-obbba-alters-charitable-deduction-strategies-for-2025-and-2026/  

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The Prue Law Group has served eastern and central Connecticut since 1980, providing comprehensive business law, estate planning, probate, and elder law services. Our team’s deep local knowledge and specialized expertise help business owners protect what matters most. AI may have been used for the initial research and drafting of the article. This content is intended for general informational purposes only and should not be construed as legal advice. For guidance on your specific situation, please contact our office for a consultation.