As we approach 2025, many people are asking: What’s next for taxes? A big part of the answer lies in the Tax Cuts and Jobs Act (TCJA) of 2017. This law brought significant changes to the tax code, but many of its provisions are set to expire at the end of 2025 unless Congress takes action.

With a new administration now controlling the White House, Senate, and House after the 2024 election, it’s likely that many of the current tax policies could remain in place. However, there are still questions about how things will play out, which makes now a great time to start planning ahead.

Here are five key things to keep in mind as you think about tax planning for 2025 and beyond.

1: Watch for Changes to Tax Policy

Under the new the government, tax policies could be extended or adjusted. For example:

• Tax brackets: Current rates might be extended, including the lower top rate of 37%.
• State and Local Tax (SALT) Deduction: The $10,000 cap on state and local taxes could change or even disappear.
• Electric vehicle tax credits: The $7,500 federal tax credit for electric vehicle purchases could go away, potentially as early as 2026.

If you’re paying more than $10,000 in state and local taxes, consider holding off on additional payments until 2025 in case the cap is removed. If you’re thinking of buying an electric car, it may be wise to act soon while the credit still exists.

2: Prepare for TCJA to Expire and Higher Taxes as a Result

The TCJA introduced substantial changes to the tax code. Here’s a summary of the key tax provisions impacted and what could happen if Congress does not take action to extend them.

• Individual tax rates: Rates will increase, with the top rate rising back to 39.6%.
• Standard deduction: Will shrink in half, making itemizing more attractive for some taxpayers.
• SALT deduction: The current $10,000 cap would go away, and higher state/local tax deductions would return.
• Mortgage interest: The limits would increase from $750,000 to $1 million of debt.
• Child tax credit: This would drop to $1,000.
• Personal exemptions: Would return, offering $2,000 per taxpayer/dependent, adjusted for inflation.
• Alternative Minimum Tax (AMT): Thresholds would go back to pre-2017 levels, potentially impacting more taxpayers.

3: Use 2025 Inflation Adjustments to Your Advantage

Inflation adjustments for 2025 have already been announced, and they’re slightly smaller due to easing inflation rates. Some key changes include:

• Standard deduction: Rises to $15,000 for single filers, $30,000 for couples filing jointly.
• Tax brackets: Income thresholds for each bracket will shift slightly. To view the adjustments, download our 2025 Tax Guide

Most taxpayers use the standard deduction rather than itemizing, so it’s a good idea to focus on above-the-line deductions like: contributions to IRAs or HSAs, student loan interest payments and retirement contributions. By reviewing your finances early in 2025, you can decide whether additional tax-saving strategies are needed to stay in your preferred bracket.

4: Consider Tax Consequences of Short- and Long-Term Investments

If you plan to sell investments or expect income from investments, remember these tax tips:

• Long-term capital gains: Gains (on assets held for over a year) are taxed at lower rates than short-term gains. Holding assets longer could save you money.
• Net Investment Income Tax: High earners may need to plan for the 3.8% Net Investment Income Tax on gains. This tax applies to single filers with modified adjusted income (MAGI) exceeding $200,000, and joint filers with MAGI exceeding $250,000.
• Asset location matters: Place investments strategically across taxable, tax-deferred, and tax-free accounts to reduce the impact of taxes over time.

5: Maximize Your Tax-Advantaged Accounts

Take full advantage of tax-advantaged accounts like 401(k)s, IRAs, and HSAs. Contributions to these accounts can lower your taxable income today and provide long-term growth benefits.

• If you can, consider spreading contributions throughout the year so you don’t have to make a large last-minute payment.
• For those thinking long-term, explore Roth IRA options, which allow for tax-free growth, or even consider converting some tax-deferred accounts to Roth IRAs.

While it’s tempting to delay paying taxes by deferring as much income as possible, remember that this could mean higher tax bills in the future. The tax consequences for when the money is distributed should be considered. Work with your CWA advisor to find the right balance for your situation.

Conclusion

Tax planning for 2025 may feel uncertain, but with a little preparation, you can take advantage of today’s opportunities and get ahead of tomorrow’s changes. Speak with your CWA advisor and with your tax professional to create a strategy tailored to your financial goals. By planning now, you’ll have peace of mind and confidence heading into the new year. Happy planning!

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party information and may become outdated or otherwise superseded without notice. Third-party information is deemed reliable, but its accuracy and completeness cannot be guaranteed. Individuals should speak with a qualified tax and financial professional based on their own circumstances to determine if the above scenarios are applicable.