Tax Changes on the Horizon: What to Expect in 2025 and Beyond
The sunrise and sunset are nature's most timeless rituals. With each new day comes a unique collection of colors and vibrancy – differing due to the current climate and time of year. While a sunset signifies the end of a day, it is also used to symbolize the ending of events, laws, and provisions. From the sunsetting provisions of the Tax Cuts and Jobs Act (TCJA) to the implementation of SECURE Act 2.0 and new IRS regulations; some notable policy changes will occur at the end of 2025, affecting individuals and businesses alike. Here’s what may impact your finances in the coming years.
TCJA Sunset: A Return to Pre-2017 Tax Rates
The most substantial change is the expiration of many individual tax provisions. Taxpayers will see the following changes:
Individual tax rates will revert to pre-TCJA levels, with the top rate increasing from 37% to 39.6%
The standard deduction will be nearly halved, potentially leading more taxpayers to itemize deductions
The estate tax exemption will be reduced by approximately 50%
These are just some of the changes that may impact your tax liability, speak to your tax professional to find out if these or other changes may affect you.
SECURE Act 2.0: Enhancing Retirement Savings
The SECURE Act 2.0 introduces several provisions aimed at improving retirement savings opportunities. Key changes taking effect in 2025 include:
Higher catch-up contributions for individuals aged 60-63
Mandatory automatic enrollment for new 401(k) and 403(b) plans
Increased the Required Minimum Distributions (RMD) age to 73 effective Jan 1. 2023 and to age 75 on Jan 1. 2033
These provisions are designed to help save for retirement and provide greater flexibility in managing retirement accounts.
New IRS Regulations: Reporting Changes
The IRS is implementing new reporting requirements that will affect many taxpayers and businesses:
Form 1099-k Threshold Reduction
The reporting threshold for Form 1099-K is decreasing, this form is used to report payments from third party network apps like PayPal and Venmo. The threshold decreased to $5,000 for payments made in 2024 (reported in 2025) and will be $2,500 in 2025 before going to $600 in 2026. This applies only to business transactions, i.e., “gig work”.
Introduction of Form 1099-DA
Beginning in 2025, brokers will be required to report digital asset transactions using the new Form 1099-DA. This form aims to standardize cryptocurrency reporting and will affect investors in digital assets.
Clean Energy Credits: A Boost for Renewable Energy
The Inflation Reduction Act extends and modifies clean energy credits. Starting Jan 1, 2025, the clean energy production tax credit and clean energy investment tax credit will replace traditional production and investment tax credits.
Planning for the Future
With these significant changes on the horizon, it’s important to consider the following:
Review your tax situation and assess how the TCJA sunset might affect you.
Evaluate your retirement savings strategy in light of SECURE Act 2.0 provisions.
Prepare for new reporting requirements if you engage in digital asset transactions or receive payments through third-party networks. (Make sure to mark PayPal/Venmo transactions as personal if they aren’t business related)
Explore opportunities in clean energy investments to take advantage of new tax credits.
By staying informed and proactive, can help you navigate these tax changes effectively. Our team is here to help you develop a strategy that aligns with your goals.
Edgar D. Paz, CPA, is a Certified Public Accountant (CPA) and joins the Allen Trust Company team as a Financial & Estate Planning Specialist. To speak with Edgar Paz, call our office at 503-292-1041 or via email to info@allentrust.com.