As we wrap up 2025, there are several significant tax changes we want to share with you. The newly enacted One Big Beautiful Bill Act (OBBBA) brings the biggest update to the tax code since 2017, with new opportunities and a few important deadlines.
Our goal is to give you a clear view of what’s changing, what to consider before December 31, and how to prepare for the next few years.
Key Tax Changes You Should Know for 2025
- Individual Income Tax Brackets: The current federal income tax brackets (10%–37%) are now a permanent part of the tax code
- Standard Deduction Increases to: $15,750 for single filers and $31,500 for married filing jointly. This may reduce the number of households who itemize, so year-end charitable giving or medical expense planning may require a different strategy going forward.
- The Senior Bonus deduction of $6,000 for individuals and $12,000 for married for those 65 and older by year end is in place until 2028. This special deduction phases out at $75,000 MAGI for individuals and $150,000 MAGI for joint filers.
- Expanded SALT deduction for the next four years: The state and local tax (SALT) deduction cap increases from $10,000 to $40,000 for 2025–2029 (with phase outs for MAGI over $500,000), then reverts back to $10,000 in 2030.
- Charitable Giving Starting in 2026:
- Only gifts exceeding 0.5% of AGI will qualify for charitable deductions. This will work similarly to the medical floor.
- Itemized deductions for high earners will be capped at a 35% benefit.
- Non-itemizers will receive a small additional deduction (up to $1,000 single / $2,000 joint for charitable contributions).
- IRAs & Required Minimum Distributions (RMDs):
- The age to begin taking RMDs for those born between 1951 -1959 is 73.
- The first RMD can be taken in the year following no later than April 1, but then two RMDs will be taken in that year.
- Other than initial distribution, the RMD must be taken by 12/31.
- Inherited IRAs for non-spouses must be distributed over 10 years, with 2025 as the initial, ratable, distribution year. Spousal IRAs continue to be distributed over their lifetime.
- Qualified Charitable Distributions (QCDs) can be made directly to a charity for those taxpayers 70½ or older. These can both satisfy the RMD requirement and reduce income since the QCD is excluded from taxable income. The limit for 2025 is $108,000.
- Roth conversions may make sense for years with lower income and also if a higher tax bracket is expected in the future, providing tax free growth and tax free withdrawals at a later date.
- Updates for Business Owners:
- 20% QBI deduction is now permanent.
- Bonus depreciation has been reinstated to 100%.
- Section 179 expensing increased up to $2.5M if placed in service by year-end.
- Domestic R&D can now be deducted in the year incurred. Foreign R&D remains amortized over 15 years. Small businesses can amend 2022–2024 returns, and all businesses may deduct remaining balances in 2025 or spread over 2025–2026.
Year-End Tax Checklist
✅ Project your taxable income for 2025, and estimate your tax bracket.
✅ Review state & local tax deduction exposure to determine how close you are to the $40,000 SALT limit. If income is over $500,000 ($250,000 for MFS) the phase out begins.
✅ For itemizers: evaluate whether accelerating state tax payments or property tax payments makes sense.
✅ If you make charitable contributions and you itemize: assess whether bunching into 2025 is beneficial. A Donor Advised Fund (DAF) is a good tool for batching donations.
✅ If 65+ years old: estimate whether you’ll stay under the MAGI limits to get the extra deduction of $6,000 for single and $12,000 for married filing jointly.
✅ For business owners: review fixed-asset acquisitions, placing-in-service timing, bonus depreciation opportunities, and R&E expense treatment. While we never recommend buying unneeded equipment to get a depreciation deduction, we do consider the timing of purchases helpful.
✅ For retirement planning: make sure you are maximizing employer plans whether as an employee or self-employed, consider Roth conversions if in a lower income year, and consider Qualified Charitable Distributions if over 70 ½ and making charitable donations.
✅ Estate & gift-planning review: update estate documents, and consider taking advantage of the $19,000 per recipient per year gift tax exemption. A married couple can gift $38,000 per year per recipient. While gifts above the annual limit typically do not incur tax, they use your lifetime estate and gift tax exemption (about $14 million per person in 2025, scheduled to increase to $15 million in 2026 under current law).
✅ Verify your withholdings and estimated tax payments for 2025; adjust if needed given the new law.
We hope these highlights help you feel prepared as you head into year-end.