What You Need to Know About the 2025 Tax Code Changes
The IRS has outlined key provisions from the recent tax code updates that will impact millions of Americans starting in 2025. These changes will particularly affect our clients who are small business owners, retirees, and families. Below is a summary of the most relevant updates and how they may change your financial planning in the years ahead.
Small Business Owners
Pass-Through Deduction (IRC §199A): The 20 percent Qualified Business Income (QBI) deduction is now permanent, providing ongoing relief for small business owners and independent contractors.
Expanded Expensing (IRC §179): The immediate deduction limit for qualifying property rises to about $2.5 million (indexed), allowing faster write-offs for equipment and technology.
Childcare Tax Credit (IRC §45F): Employers can now claim up to $500,000 in credits—or $600,000 for eligible small businesses—when providing childcare assistance to employees.
Opportunity Zones: Investments in rural Qualified Opportunity Zones receive a boost, with the “substantial improvement” test reduced from 100 percent to 50 percent.
Retirees
Senior Deduction (Sec. 70103): Taxpayers 65 and older can claim an extra $6,000 deduction ($12,000 if married filing jointly) through 2028, with income-based phaseouts.
Inflation-Adjusted Brackets: Higher standard deductions and tax brackets mean lower taxable income for many retirees.
Estate Threshold: The estate-tax exclusion increases to $15 million in 2026.
IRA Contributions: Contibutions limits for IRAs have increased to $7000 per person, $8000 if you’re over age 50, and new child-savings provisions (below) introduce an IRA-style vehicle for minors where grandparents can contibute.
Families
Child Savings Accounts (amends §408): Babies born 2025–2028 receive a $1,000 federal contribution to a new tax-deferred account. Parents and others can add up to $5,000 per year (employers up to $2,500). Funds become accessible at age 18.
Adoption Credit (IRC §23): Now partially refundable, helping more families offset adoption costs.
No-Tax on Overtime & Tips (Secs. 70201–70202): For 2025–2028, qualifying workers can deduct certain overtime pay and tips from taxable income.
These updates aim to boost business growth, reward work, and provide greater savings opportunities across generations—making 2025 a pivotal year for tax planning. To see more about these new tax code provisions please visit the IRS site: IRS Tax Code
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