2025 Potential Tax Changes: What They Mean for You and How to Prepare
Potential Tax Changes in 2025: What You Need to Know
Tax rules are set to change in 2025, and these updates could impact everyone from individual taxpayers to businesses. Whether it’s adjustments to your tax brackets, retirement savings, or tax credits, staying in
formed now can help you plan smarter for the future. Here’s a breakdown of the biggest changes coming your way and how they might affect you.
What Happens When Key Tax Cuts Expire?
Back in 2017, the Tax Cuts and Jobs Act (TCJA) made some major changes to the tax code, but not all of those changes were permanent. Many of the benefits are set to expire by the end of 2025. Here's what could change:
Tax Rates: The tax brackets we’ve been using will go back to the old, higher rates. For instance, the top tax rate will jump from 37% to 39.6%.
Standard Deduction: The standard deduction, which is currently $13,850 for singles and $27,700 for married couples, will drop. Personal exemptions, which were removed, are also expected to make a comeback.
Child Tax Credit: Right now, you can get up to $2,000 per child, but in 2025, that could drop to $1,000. Plus, fewer families may qualify due to stricter income limits.
State and Local Tax (SALT) Cap: The current $10,000 cap on SALT deductions might disappear entirely—or Congress could adjust it to something like $20,000.
If Congress doesn’t step in, most households will see higher tax bills, while higher-income taxpayers might catch a break with the potential removal of the SALT limit.
Inflation Adjustments from the IRS
Every year, the IRS updates tax brackets, deductions, and credits to keep up with inflation. Here’s what to expect in 2025:
Tax Brackets: Income levels for each tax bracket will go up slightly, which means you might stay in the same bracket even if you earn more.
Standard Deduction: The deduction will increase—single filers could claim $15,000, and joint filers $30,000.
Earned Income Tax Credit (EITC): The maximum EITC will rise from $7,830 in 2024 to $8,046 in 2025, giving low- and moderate-income workers a bigger boost.
These changes are designed to stop "bracket creep," where inflation pushes you into a higher tax bracket even if your purchasing power hasn’t really increased.
Retirement Savings Just Got a Boost
If you’re saving for retirement, there’s good news! Contribution limits for some accounts are going up:
401(k) Plans: You’ll be able to save $23,500 in 2025, up from $23,000 in 2024.
Catch-Up Contributions: If you’re 60 to 63 years old, you can make catch-up contributions of $11,250 starting in 2025—much higher than the $7,500 allowed for those aged 50 and up.
These increases are meant to help Americans save more as they get closer to retirement, especially with inflation in mind.
What’s Next in Washington?
With a presidential election and new priorities in Congress, debates are heating up over what to do about the expiring tax cuts. Some of the hot topics include:
Keeping Tax Cuts: Some lawmakers want to make today’s lower rates permanent to prevent tax hikes for millions of people.
Child Tax Credit Expansion: There’s a push to keep the $2,000 credit or even increase it, recognizing how much it helps families.
New Incentives: Other proposals could introduce fresh tax breaks for things like clean energy or small business investments.
It’s too early to say how these debates will play out, but they could bring even more changes to the tax code in the coming years.
How to Prepare
With so many potential changes on the horizon, now is the time to get ahead. Whether you’re thinking about how these updates might impact your family’s finances or your business, having a plan can save you money and stress down the line.
Have questions? Reach out to us for expert advice and guidance to make sure you’re ready for whatever 2025 brings!
