Important Tax Changes for 2025 – What You Need to Know

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As we approach the new tax year, it’s important to stay informed about key tax changes that could impact your financial planning. The IRS has announced several updates for the 2025 tax season. Below are some of the most significant changes:

  1. Adjustments to Tax Brackets and Standard Deductions

The IRS has made inflation-related adjustments to tax brackets, which could affect your taxable income. Additionally, the standard deduction has increased to the following amounts:

  • Single Filers: $14,600 (up from $13,850)
  • Married Filing Jointly: $29,200 (up from $27,700)
  • Head of Household: $15,900 (up from $13,850)
  1. Changes to Retirement Contribution Limits

For 2025, contribution limits have been adjusted as follows:

  • 401(k) Contribution Limit: $23,000 (up from $22,500)
  • IRA Contribution Limit: $7,000 (up from $6,500)
  • Catch-up Contributions (age 50 and older): $7,500 for 401(k) plans and $1,500 for IRAs
  1. Child Tax Credit and Earned Income Tax Credit Updates
  • Refundable Portion of Child Tax Credit: Increased from $1,500 to $1,700 per child.
  • Earned Income Tax Credit: Adjustments have been made to income thresholds and credit amounts, potentially increasing benefits for eligible taxpayers. The maximum credit is $7,830 for lower-wage taxpayers with three or more qualifying children.
  1. Business Tax Changes

For business owners, notable updates include:

  • Meals and Entertainment Deductions: Business meal deductions remain at 50%, while entertainment expenses continue to be non-deductible.
  • Section 179 Expensing: Increased to $1.22 million (up from $1.16 million), with a phase-out beginning at $3.05 million.
  • Bonus Depreciation: Phased down to 60% (from 80%) for eligible property placed in service during 2025.
  1. New Reporting Requirements for Digital Payments

If you receive payments through platforms like PayPal, Venmo, or other digital payment services, the IRS has lowered the reporting threshold to $600 per year, meaning more transactions will require 1099-K forms. Proper record-keeping will be more important than ever.

If you have any questions or want to schedule a tax planning consultation, please don’t hesitate to reach out. I’m here to help you navigate these changes and maximize your tax benefits.

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