The Tax Cuts and Jobs Act (TCJA) of 2017 introduced significant tax reductions for individuals and corporations, many of which are set to expire at the end of 2025. As this expiration date approaches, Congress is actively debating potential extensions and modifications to these provisions. Consulting with a financial advisor can help you navigate these changes and optimize your tax strategy.
House of Representatives Passes Budget Resolution: In February 2025, the House of Representatives narrowly passed a budget resolution by a 217-215 vote. This resolution aims to implement $4.5 trillion in tax cuts and $2 trillion in spending reductions over the next decade. Key objectives include extending the TCJA tax cuts, increasing funding for military and border security, and reducing spending on programs like Medicaid and food assistance. The resolution now awaits consideration in the Senate, where further negotiations are expected.
IRS Announces 2025 Inflation Adjustments:
| Filing Status | Standard Deduction 2025 |
| Married Filing Jointly | $30,000 |
| Head of Household | $22,500 |
| Single Filers | $15,000 |
| Married Filing Separately | $15,000 |
| Filing Status | AMT Exemption Amount 2025 |
| Unmarried Individuals | $88,100 |
| Married Filing Jointly | $137,000 |
In addition to legislative efforts, the Internal Revenue Service (IRS) has announced annual inflation adjustments for the 2025 tax year. These adjustments include an increase in the standard deduction and changes to the Alternative Minimum Tax (AMT) exemption amounts.
New 401(k) and IRA Contribution Limits for 2025: The IRS has also announced new contribution limits for retirement accounts in 2025. The annual contribution limit for 401(k) plans has increased to $23,500, up from $23,000 in 2024. The catch-up contribution limit for employees aged 50 and older remains at $7,500, allowing a total contribution of up to $31,000. For IRAs, the contribution limit remains at $7,000, with a catch-up contribution limit of $1,000 for individuals aged 50 and over. Consulting with a financial advisor can help you maximize your retirement savings under these new limits.
Emerging Legislative Proposals: Amid these developments, new legislative proposals are emerging. Notably, the FairTax Act of 2025 has been introduced in the House of Representatives. This bill aims to overhaul the current tax system by repealing income and other taxes, abolishing the IRS, and implementing a national sales tax administered primarily by the states. While this proposal represents a significant shift in tax policy, it is still in the early stages of the legislative process and would require extensive debate and approval before becoming law.
As the expiration of the TCJA tax cuts approaches, it is crucial to stay informed about legislative developments and IRS adjustments. These changes could have significant implications for individuals and businesses alike. Consulting with a financial advisor can provide personalized guidance to navigate these changes effectively.
See below link to our previous article regarding additional tax tips for the current filing season.
