A primary objective of the incoming Presidential administration and Congress will be to reform current tax laws that are set to expire at the end of 2025 and lower taxes overall for the American taxpayer. Tax legislation is expected to be a priority of Congress during the year, and expectations are for tax legislation to become law by autumn or the end of the year at latest.
There are many details and negotiations still to be hashed out between political parties and even between GOP members, so it’s likely that any changes to tax law won’t apply until 2026. In the meantime, it’s a good time to prepare for 2025 taxes and keep in mind how this impending legislation may affect your personal tax planning in the future.
Extension and Changes to the 2017 TCJA Provisions
Many of the provisions of the 2017 Tax Cut and Jobs Act, implemented during the first Trump Administration, are set to expire at the end of 2025. GOP Congressional leaders and the President-elect want to make many of these permanent, including lower individual tax rates, higher standard deductions, the child tax credit, the $10,000 limitation on state and local tax deductions, and higher lifetime estate and gift tax exemptions. Some in Congress and the President-elect also favor increasing the state/local tax deduction.
Also on the table are proposals to decrease the corporate tax rate from the current 21% to 15%, implementing tariffs on most imported goods and services, and allowing past expansions of healthcare subsidies under the Affordable Care Act to expire. The 20% deduction, also known as the QBI deduction, on “pass-through” corporate income (e.g., S-corps and partnerships) may be extended in a nod to small businesses. The Alternative Minimum Tax (AMT) in the 2017 Act was adjusted to affect fewer taxpayers, and this provision is to expire after 2025 as well. If your tax situation subjects you to AMT status, you should monitor the debate on this provision closely to see how Congress handles new AMT proposals.
Start Your 2025 Tax Planning Now
Current tax law provides some important increases to retirement plan contributions, so adjusting your paycheck withholding to reflect these increases would be a smart move. For qualified plans like 401(k) and 403(b) accounts, the individual contribution limit rises to $23,500 for the year. Those who will be age 50-59 and 64+ in 2025 can contribute an additional $7,500 as a “catch-up.” Those attaining age 60-63 in 2025 get a higher special catch-up maximum of $11,250.
Likewise, SIMPLE IRA participants have a higher maximum of $16,500 with an additional $3,500 “catch-up” for those over 50, and a $5,250 “special catch-up” for those at 60-63 in 2025. While traditional IRA and Roth IRA maximums stay the same at $7,000 with a $1,000 catch-up for those age 50+, the income and deduction ceilings for IRAs will increase; so if you were phased out of contributing to a Roth IRA or deducting your contribution to a traditional IRA, see how you might take advantage of these increased income limits this year.
An often-overlooked tax strategy is the health savings account (HSA), which allows those in a high-deductible health plan to make tax-deductible contributions and grow the HSA account tax-free for future out-of-pocket healthcare expenses. For 2025, the caps on contributions increases to $4,300 for individuals and $8,550 for those having a family plan, along with an extra $1,000 for those over 55 years old. Advisor Mallory Kretman explains, “Contributions to an HSA allow individuals to reduce their taxable income by the amount they contribute, up to the aforementioned annual contribution limits set by the IRS. This immediate reduction in taxable income lowers your overall tax liability, making it a powerful tool for tax efficiency.”
Additionally, all withdrawals for qualified medical expenses are tax-free and there are no “use-it or lose-it” provisions. Establishing and contributing to an HSA would be a tax-savvy move for the coming year.
Another tax strategy to consider is a qualified charitable distribution (QCD), which allows individuals aged 70½ or older to transfer up to $108,000 annually from their IRA directly to any number of qualified charities. Mallory shares, “This transfer is excluded from taxable income, providing significant tax benefits. For individuals aged 73 or older, QCDs can also satisfy required minimum distributions (RMDs), reducing the taxable income associated with these withdrawals. For those who do not rely on their RMDs for living expenses, QCDs offer a meaningful way to support charitable causes while maximizing tax efficiency.”
Review Your Financial and Estate Planning
One of the significant “sunset” provisions of the 2017 Act addresses the estate and gift tax exclusions. Currently at approximately $14 million per person, once the TCJA expires, the exclusion drops by about half to an estimated $7 million per individual, potentially subjecting more estates to end-of-life taxation. If your net worth is approaching $5 million or more, it would be well worth your time to discuss whether advanced estate planning strategies should be part of your financial plan.
Additionally, the cap on charitable cash donation, currently set at 60% of adjusted gross income (AGI), is scheduled to revert to 50% of AGI by year-end unless extended through new tax legislation. These provisions may be extended with new tax legislation, but it is always a good idea to review your tax planning, estate planning, and charitable giving strategies in case these measures don’t receive extensions into the future.
Maximize Your Tax Planning With a Trusted Financial Partner
These are just a sample of the ways Laurel Wealth Planning can help you with tax planning and other personal finance matters. LWP advisors can put together effective programs based on what you want and need. To set up a free consultation, call Laurel Wealth Planning at (952) 854-6250 or contact them online.
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Mallory is a Wealth Manager and Shareholder. She listens deeply and helps simplify complex financial situations to help clients move into an easier, clearer future. She aims to give financial advice that is compassionate, wise, and easy to understand.
