It is Finally Tax Day. Now, Time to Look Ahead at 2025’s Tax Law Shifts to Come.

As we move deeper into 2025, major legislative and economic shifts are taking shape — and for individuals and business owners alike, staying ahead of these changes is key. At Spizzirri Law, we believe in keeping our clients informed not only about what’s happening now but what’s on the horizon. Here’s a roundup of the latest tax and financial developments, with our perspective on how they could affect you:

Potential Tax Law Changes: What's on the Table?

Congress is actively discussing a large tax bill this year, though the path forward is complicated by the narrow majority margins and budget rules in the Senate. While key GOP senators are aiming to make tax changes permanent, budget constraints mean many provisions could only be temporary, much like those in the 2017 Tax Cuts and Jobs Act.

Possible targets for elimination include:

• The Carried Interest Tax Break

  • The carried interest tax break has long allowed private equity, hedge fund, and investment managers to pay a lower capital gains tax rate on a share of their profits, instead of being taxed like ordinary income. Now, a key part of the proposed tax bill is looking to close that loophole and tax those earnings at higher income tax rates. While it’s still being debated in Washington, this change would have a big impact on fund managers and investors involved in partnerships. If you’re in that space, now’s a smart time to start reviewing your tax strategy and explore ways to stay ahead of potential changes.

    
    

• The Tax-Free Interest Break for Municipal Bonds

  • For years, municipal bonds — or “munis” — have been a popular investment for individuals looking to earn steady, tax-free income. The interest earned on most munis has been exempt from federal income tax, making them especially attractive for high-income earners. However, the new tax bill under discussion includes a proposal to repeal this tax-free interest break, which could mean muni bond income would become taxable moving forward. While it’s uncertain if this change will make it into the final law, it’s something worth paying attention to. If you rely on muni bonds for tax-efficient income, now’s a good time to connect with your tax advisor or attorney to review your portfolio and consider your options.

Student Loan Debt Cancellation Relief Ending

As a newly graduated College Alumni myself I believe this one is extremely important and definitely worth looking into more. 2025 marks the final year for income tax forgiveness on student loan debt discharged under certain pandemic-era provisions. If you're considering a debt forgiveness program, it’s critical to understand how cancellation of indebtedness income could impact your tax return moving forward. So we advice before choosing one you consult with a tax professional prior.

Retirement Plan Payout Rules Evolving

A modest relief provision now allows one early distribution per year (up to $1,000) from IRAs or 401(k)s for personal emergencies, exempt from the usual 10% penalty. However, larger hardship withdrawals remain subject to tax and penalties, underscoring the need for proper planning and documentation in retirement account management.

Recent Legal Rulings of Interest

A fascinating court case recently sided with a taxpayer whose forfeited IRA (seized due to criminal charges) was ruled non-taxable upon seizure because it was considered government property at the time of forfeiture. This highlights the nuanced ways ownership and control issues can affect tax liability — an area where expert legal guidance is essential.

Noncash Charitable Donations: A Tax Trap to Avoid

Lastly, another Tax Court case denied a substantial charitable deduction because the donors failed to obtain proper qualified appraisals for donated goods. Remember: Noncash contributions, especially of high value, require strict documentation compliance — a tax attorney can help ensure deductions hold up under IRS scrutiny and can ensure you get the best bang for your buck.

Thank you for reading, and Happy Tax Day!

All the best,

MD

Reference: The Kiplinger Tax Letter: Vol. 100, No. 7, Pages 1&2