Jason Glisczynski. (Contributed)

Financial Sense: Tax law updates for 2025

By Jason Glisczynski.

Staying informed about upcoming tax law changes is essential for making smart financial decisions. With adjustments to standard deductions, retirement contributions, and estate tax exclusions on the horizon for 2025, it’s important to understand how these updates might affect your plans.

It’s important to note that having this information is central, but information alone does not translate into value. Knowing how to apply the information to your situation is critical to maximizing your success. If your financial plan does not include a keen eye on taxes, there is a good chance you are leaving significant opportunities untapped.

Here’s a straightforward breakdown of the key changes so you can plan with confidence.

IRS adjustments for 2025

Standard deduction increases

  • Married filing jointly: Rises to $30,000, an $800 increase from 2024.
  • Heads of household: Increases to $22,500, up $600.
  • Single filers and married filing separately: Now $15,000, a $400 boost.

Alternative minimum tax exemption

  • Unmarried individuals: Exemption amount increases to $88,100; phase-out begins at $626,350.
  • Married filing jointly: Exemption rises to $137,000; phase-out starts at $1,252,700.

Earned income tax credit

Maximum EITC for taxpayers with three or more qualifying children increases to $8,046, up from $7,830 in 2024.

Estate tax exclusion

The federal estate tax exclusion amount increases to $13.99 million from $13.61 million in 2024.

Retirement account changes

401(k) contribution limits

  • Contribution limit increases to $23,500, up from $23,000 in 2024.
  • Catch-up contributions for participants aged 50 and older remain at $7,500.
  • A new provision for individuals aged 60 to 63 allows a higher catch-up contribution limit of $11,250, effective in 2025.

Roth IRA income phase-out ranges

  • Single filers and heads of household: Phase-out range increases to $150,000–$165,000.
  • Married filing jointly: Range rises to $236,000–$246,000.

Potential extensions of the Tax Cuts and Jobs Act

Many provisions of the TCJA are set to expire at the end of 2025. Key proposals under consideration include:

Qualified business income deduction

Extension of the 20% deduction for certain QBI, currently set to expire at the end of 2025.

Bonus depreciation

Proposal to reinstate and make permanent 100% bonus depreciation, which is scheduled to phase out beginning Jan. 1, 2027.

Individual income tax rates

Current rates — 10%, 12%, 22%, 24%, 32%, 35% and 37% — are set to revert to pre-TCJA levels after 2025 unless extended.

Corporate income tax rate

Proposal to reduce the rate from 21% to 20%, with a 15% rate for companies manufacturing in the U.S.

Estate and gift tax exemption

Without legislative action, the exemption will drop significantly in 2026, reverting to near-2017 levels of approximately $7 million.

State and local tax deduction cap

Proposal to eliminate the $10,000 cap enacted under the TCJA.

Elimination of taxes on Social Security benefits

There is a proposal to eliminate taxes on Social Security benefits. However, such a change would require significant legislative support and is uncertain at this time.

Staying informed

Given the dynamic nature of tax laws, it’s crucial to stay updated on these developments. Consulting with a tax professional, Certified Financial Planner professional, or Certified Private Wealth Advisor professional can provide personalized guidance tailored to your financial situation, with a critical eye on how taxes impact your outcome.

Jason Glisczynski is co-owner and principal advisor for Silvertree, LLC. He is a CERTIFIED FINANCIAL PLANNER™ Professional and a Certified Private Wealth Advisor Professional, and specializes in working with business owners, executives, and workers in manufacturing.

Investment advisory and financial planning services are offered through Summit Financial, LLC, a SEC-registered investment advisor doing business as Silvertree, LLC. Insurance products may be offered through Summit Risk Management, LLC, an affiliate of Summit Financial, LLC. Summit and its affiliates do not provide tax or legal advice. Please consult with your tax and/or legal advisors before taking any action that may have tax or legal implications.