Legacy Law Blog

Regardless of how you feel about the events of 2024, this coming year promises to be one of significant change and movement in all areas of our shared experience.

As we step into 2025, the potential for a new taxing regime and potential reforms to current tax laws are on the horizon. Whether you're an individual taxpayer or a business owner, being proactive and informed is essential for effectively incorporating these changes into your tax planning for the year.

But where does one begin when faced with the challenges of predicting or reacting to these changes? Unfortunately, there is no easy answer, but Plunkett Cooney's Tax Law Practice Group members will continue to monitor the tax environment and provide updates throughout the year.

The following are the top 10 tax law subjects we are monitoring during Q1 of 2025:

1. Understand the Expiring Tax Cuts and Jobs Act Provisions

The Tax Cuts and Jobs Act (TCJA) of 2017 brought substantial changes to the tax code, many of which are set to expire at the end of 2025. Key provisions include:

• Individual income tax rate reductions (e.g., the top rate reverting from 37% to 39.6%)
• Doubling of the standard deduction
• Changes to itemized deductions, such as the $10,000 cap on state and local taxes (SALT).

The Trump administration has promised to address these expiring TCJA provisions by extending them or making them permanent. Any action to address these provisions will require the passage of legislation in Congress.

2. Maximize Standard Deductions

For 2025, the IRS has increased the standard deduction due to inflation adjustments:

• $30,000 for married couples filing jointly
• $22,500 for heads of households
• $15,000 for single filers

If you typically itemize deductions, compare them against these new thresholds to determine whether it is more advantageous to claim the standard deduction at the new higher rates.

3. Leverage Retirement Contribution Limits

Take advantage of increased contribution limits for retirement accounts like 401(k)s and IRAs in 2025. These adjustments help you reduce taxable income while saving for the future. For 2025, the IRS has increased the 401(k) contribution limits as follows:

• Employee Contribution Limit: $23,500, up from $23,000 in 2024
• Catch-Up Contributions (Age 50 and Older): An additional $7,500 for individuals aged 50–59 and 64+, allowing a total contribution of $31,000
• Enhanced Catch-Up Contributions (Age 60–63): Individuals aged 60–63 can contribute an additional $11,250 instead of the standard $7,500, for a total of $34,750.
• Combined Employer and Employee Contribution Limit: $70,000, up from $69,000 in 2024

Taxpayers can often lower their overall tax liability by increasing their annual contributions to retirement.

4. Plan for State Tax Changes

Several states are implementing new tax policies in 2025:

• The following nine states are reducing individual income tax rates:

• Indiana: Reduced its flat income tax rate from 3.05% to 3%.
• Iowa: Transitioned from a graduated tax system (top rate of 5.7%) to a flat 3.8% rate.
• Louisiana: Shifted to a single-rate income tax of 3%, replacing its previous graduated system.
• Mississippi: Lowered its flat income tax rate from 4.7% to 4.4%.
• Missouri: Restructured its brackets, adding a new 4.3% rate for certain income levels.
• Nebraska: Reduced its top marginal tax rate from 5.84% to 5.2%.
• New Mexico: Adjusted its brackets, now ranging from 1.5% to 5.9%, targeting relief for low- and middle-income taxpayers.
• North Carolina: Decreased its flat rate from 4.5% to 4.25%.
• West Virginia: Reduced its top marginal tax rate from 5.12% to 4.92%.

• New Hampshire has repealed its tax on interest and dividends.
  
  

Taxpayers should review their state’s specific changes to ensure compliance and take advantage of potential savings.

5. Prepare for Crypto Reporting Requirements

Starting in 2025, crypto exchanges will issue Form 1099-DA for digital asset transactions. This form will include transaction details such as gross proceeds, transaction type and fair market value. Taxpayers will need to incorporate this new form into their annual tax returns.

If you trade or invest in cryptocurrencies, maintain detailed records of all transactions to ensure accurate reporting and to avoid penalties. A future blog post will cover the new crypto reporting requirements in more detail.

6. Stay Updated on Child Tax Credit Changes

The expanded Child Tax Credit (CTC) under TCJA remains a key provision, but its future is uncertain beyond 2025. If extended or modified, it could impact families significantly. Currently, it offers up to $2,000 per qualifying child under age 17.

The incoming administration has expressed interest in expanding the CTC, though specific details remain unclear. Both President Donald Trump and Vice President J.D. Vance have indicated support for increasing the credit, with Vance suggesting a potential increase to $5,000 per child. However, these proposals are still in the discussion phase and lack concrete legislative frameworks.

7. Monitor Corporate and Business Tax Adjustments

Business owners should prepare for potential changes in pass-through deductions and bonus depreciation:

• The Qualified Business Income (QBI) deduction is set to expire after 2025 unless extended.
• Bonus depreciation will phase out completely by 2027 but drops to 40% in 2025.
  
  

As with other provisions highlighted in this blog, much is still to be determined regarding QBI and bonus depreciation. Both are likely to be addressed by the new administration or Congress as part of future tax legislation.

8. Be Aware of Alternative Minimum Tax (AMT) Updates

For high-income earners, the AMT exemption amounts have increased:

• $137,000 for married couples filing jointly.
• $88,100 for single filers.

This increase will provide welcome relief for taxpayers who would otherwise need to pay the AMT. Ensure your tax planning accounts for AMT exposure if applicable.

9. Optimize Charitable Contributions

With potential changes to itemized deductions post-TCJA expiration, charitable giving strategies may need adjustment. Contributions may revert to a lower AGI threshold (50% from the current 60%). Consider front-loading donations in 2025 if itemizing becomes less favorable after expiration.

10. Consult a Tax Professional Early

Given the uncertainty surrounding expiring provisions and proposed reforms by policymakers (e.g., extending TCJA cuts or introducing new credits), consulting a tax professional is crucial. They can help you navigate these changes and implement strategies tailored to your financial goals.

By staying informed and proactive about these developments, you can better manage your tax obligations and take advantage of opportunities available in 2025.