Following are 8 key 2025 individual planning points to evaluate for individual taxpayers:
A. Tax Rates and Standard Deduction
- TCJA Lower Individual Rates Made Permanent: The reduced individual tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent for tax years after 2025. No reversion to pre-2018 rates[4].
- Standard Deduction Increased and Made Permanent: For 2025, the standard deduction is $31,500 (MFJ), $23,625 (Head of Household), $15,750 (Single/MFS), with inflation adjustments for 2026 and beyond.
B. Personal Exemptions and Credits
- Personal Exemptions Remain Suspended: No return of personal exemptions, except a new $6,000 deduction for seniors (65+) through 2028, phased out at higher incomes.
- Child Tax Credit: Increased to $2,200 per child, made permanent, with inflation adjustments and stricter SSN requirements.
C. Itemized Deductions and SALT Cap
- SALT Deduction Cap: For 2025, the cap is increased to $40,000 ($20,000 MFS), indexed for inflation, with a phase-down for high incomes, reverting to $10,000 after 2029.
- Miscellaneous Itemized Deductions: Permanently disallowed, except for educator expenses (expanded to include coaches and nonathletic supplies).
- Overall Limitation on Itemized Deductions: New formula reduces itemized deductions by 2/37 of the lesser of deductions or income above the 37% bracket threshold.
D. Charitable Contributions
- Above-the-Line Deduction for Nonitemizers: Up to $1,000 ($2,000 MFJ) for cash contributions to public charities.
- New Deduction Floors: Only contributions exceeding 0.5% of AGI (individuals) or 1% of taxable income (corporations) are deductible, with carryforward rules for disallowed amounts.
- 60% AGI Limit for Cash Gifts to Public Charities Made Permanent: Coordination rules clarified, but be aware of technical drafting issues.
E. Estate and Gift Tax
- Exemption Amount: Permanently increased to $15 million per person for estates/gifts after 2025, indexed for inflation from 2027.
F. Other Notable Provisions
- AMT Exemption Amounts: Increased and made permanent, with inflation adjustments.
- Mortgage Interest Deduction: $750,000 cap made permanent; mortgage insurance premiums treated as interest.
- Casualty Loss Deduction: Now includes state-declared disasters, not just federally declared.
G. Energy and Green Incentives
- Termination of Clean Energy Credits: Credits for new and used clean vehicles, commercial clean vehicles, and several other energy-related credits are terminated for property acquired or placed in service after September 30, 2025, or June 30, 2026, depending on the credit.
- Clean Fuel Production Credit: Extended through 2029, but with new restrictions on foreign feedstocks and negative emissions rates.
H. 1099 Reporting and Compliance
- 1099-MISC/NEC Threshold Increased: Reporting threshold increased to $2,000, indexed for inflation, for payments made after December 31, 2025.
- Form 1099-K Threshold Restored: $20,000/200 transaction threshold for third-party network transactions.
Year-End Planning Recommendations
- Accelerate Deductions and Defer Income: Consider timing of income and deductions, especially with permanent lower rates and increased standard deduction.
- Maximize Use of Expiring Energy Credits: If eligible, complete purchases or installations before the relevant expiration dates.
- Review Charitable Giving Strategies: Plan for the new deduction floors and above-the-line deduction for nonitemizers; consider bunching contributions to exceed the floor.
- Evaluate Business Structure: With permanent 199A deduction and expanded QSBS benefits, review entity choice and potential for new QSBS issuances.
- Estate Planning: Consider gifting strategies in light of the permanently increased exemption.
- Monitor State and Local Tax (SALT) Deductions: Plan for the higher cap in 2025 and potential phase-downs.
- Review International Structures: Assess CFC status and compliance with new attribution and reporting rules.
- Prepare for New Reporting Thresholds: Update systems for increased 1099 thresholds and restored 1099-K limits.