Planning and Tax Updates for 2025
As we start 2025, it’s a good time to check in on tax updates that might affect your financial plans. Whether you're saving for retirement, managing investments, or planning for your family’s future, these changes could make a difference to your wallet.*
Adjustments to Tax Brackets
Tax brackets have shifted about 2.8% higher to keep up with inflation, so you may be able to keep more of your income at lower tax rates. The 22% and 24% brackets now cover incomes from $96,951 to $394,600, making it easier to avoid higher tax rates. You can review Charles Schwab updated tax reference guide here: Schwab 2025 Tax Reference Guide to determine which numbers may be relevant to your situation.
Higher Standard Deduction
The Standard Deduction is now $30,000 for joint filers and $15,000 for individuals, which means many taxpayers will owe less. If you're 65 or older or legally blind, you can deduct an extra $1,600.
Retirement Savings Updates
You can contribute up to $23,500 to a 401(k) and $7,000 to an IRA. If you're 50 or older, you can make extra catch-up contributions, $1,000 for IRAs and $7,500 for 401(k)s. New this year, workers aged 60-63 can make an even bigger “super” catch-up contribution of $11,250 to a 401(k) or 403(b).
Investment Tax Benefits
If you sell investments you've held for more than a year, you’ll likely pay no more than 15% in taxes if your taxable income is under $600,050. Some people with taxable income below $96,700 may even qualify for the 0% rate on long-term capital gains. Knowing the best time to realize capital gains can be a powerful strategy.
Estate and Gifting Updates
The federal estate tax exemption is now $13,990,000 per person, and the annual gift limit is up to $19,000, making it easier to pass on wealth without extra tax complications. However, this exemption is viewed by many to potentially be on the chopping block after the current TCJA provisions sunset at the end of 2025.
Making the Most of Charitable Giving
If you give to charity, you might benefit from grouping donations into one year to exceed the standard deduction. Donor-advised funds (DAFs) are another option to spread out your giving while getting a tax benefit upfront. Other, more complex, gifting strategies can be appropriate during irregular income or capital gains years, such as the sale of a business or stock option vesting.
Business Tax Breaks
Small business owners can still take advantage of the 20% Qualified Business Income deduction. This deduction starts phasing out at $394,600 for joint filers and disappears completely at $494,600.
Investment Income Tax Considerations
The 3.8% Net Investment Income Tax (NIIT) still applies to investment income for those earning over $250,000 (joint filers) or $200,000 (single filers). Since these limits don’t adjust for inflation, careful tax planning can help reduce this extra tax.
Tax Rules That Haven’t Changed
Some tax rules are staying the same, including:
The $10,000 cap on state and local tax (SALT) deductions
The $500,000 home sale gain exclusion for couples
The $3,000 limit on investment loss deductions
The income levels that determine how Social Security benefits are taxed
Looking Ahead
As mentioned, the turn of the calendar to 2026 will also bring an end to the current Tax Cuts and Jobs Act implemented in 2018. Since this was put in place during President Trump’s first term, the option of simply extending this act (with a few adjustments), is a real possibility. More broad-sweeping updates have also been mentioned at a high level, but there is no concrete proposal yet. Regardless of what changes, we are always on the lookout for new opportunities to increase efficiency for our clients.
While far from an exhaustive list, these tax updates give you ways to keep more money in your pocket and grow your savings. The tax code can be very complex, having an intentional plan in place, and knowing when to consult a professional will help maximize these opportunities and avoid costly mistakes.
Facts in this article sourced from IRS website: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025
Investment advice is offered through Belpointe Asset Management, LLC. 500 Damonte Ranch Parkway, Building 700, Unit 700, Reno, NV 89521
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.