2025 Tax Changes Explained: Essential Updates You Should Know.

As we approach the 2025 tax season, individuals and business owners must stay informed about legislative changes and tax strategies to minimize liabilities and maximize deductions. Our firm is committed to keeping you ahead of these updates, and we’ve compiled key insights to help you navigate upcoming changes.

Guarding Against IRS Audits

With tax season around the corner, it’s essential to ensure your tax return is error-free to avoid triggering an audit. For a more in depth description of each, check out the last blog post. But for now here are five ways to reduce your audit risk:

1. Avoid Common Mistakes – IRS systems cross-check reported figures, so errors like incorrect Social Security Numbers or mismatched taxable income can raise red flags.

2. Tell the Truth – Fudging deductions or misrepresenting income can lead to serious consequences. Stick to accurate records and legitimate claims.

3. Be Realistic – Excessive deductions, especially for charitable donations, can look suspicious. Keep them within reasonable limits.

4. E-File Your Return – The IRS encourages electronic filing, reducing the likelihood of errors.

5. Use a Tax Professional – Hiring a knowledgeable tax expert can help you navigate complex tax rules and avoid audit triggers.

If you do face an audit, remember to remain calm, provide only the requested documents, and consult a tax professional when needed.

Important Tax Deductions to Remember

Every year, taxpayers overlook valuable deductions that can significantly lower their tax bill. Here are some to keep in mind for 2024 returns:

• Charitable Donations – If you travel for a charitable organization, expenses like airfare, lodging, and meals may be deductible.

• Medical Expenses – If medical costs exceed 7.5% of your adjusted gross income (AGI), they may be deductible.

• Disaster Losses – Taxpayers in federally declared disaster zones may be eligible for deductions on unreimbursed losses.

• Mortgage Interest & Refinancing Points – Points paid on refinanced mortgages can be deducted over the loan term.

• Jury Duty Payments – If your employer pays your salary while you serve on a jury, but you must hand over your jury duty pay, you can deduct that amount.

  
  

Upcoming Changes to Retirement and Business Taxes

New provisions under the SECURE 2.0 Act will take effect in 2025, impacting 401(k) contributions and tax breaks:

• Catch-Up Contributions to Roth 401(k)s – Employees aged 50+ earning more than $145,000 annually must direct catch-up contributions to Roth 401(k) accounts.

• Expanded ABLE Accounts – Individuals with disabilities will be able to open ABLE savings accounts until age 46 instead of the previous limit of 26.

• Penalty-Free 401(k) Withdrawals – Up to $2,500 can be withdrawn without penalty for long-term care premiums.

For businesses, tax policy discussions continue, with lobbying efforts pushing to extend the 20% Qualified Business Income (QBI) Deduction, bonus depreciation for new assets, and improved tax treatment for research and development costs.

Stay Prepared with Expert Guidance

Tax law is constantly evolving, and failing to plan can lead to missed opportunities and unnecessary liabilities. Whether you’re an individual taxpayer or a business owner, our firm is here to help you navigate the complexities of the tax code and maximize your financial well-being.

Reference: The Kiplinger Tax Letter- Vol. 100, No. 5, Pages 1&2