Once you file your tax return each year, it’s a good idea to start planning for next year’s return. Here are a few things you can look at doing today to help set yourself up for success in tax year 2025.
Did you owe more than $1,000 or receive a $1000+ refund on your 2024 tax return?
Consider discussing your tax withholding with your tax professional and your HR/payroll contact. Receiving a refund from the U.S. government is basically providing the feds with an interest-free loan. If you owed more than $1,000, you may not be withholding enough for taxes, so working with a tax professional will be key to getting your withholding dialed in.
If between the ages of 60-63, consider increasing retirement plan contributions.
The SECURE Act 2.0 allows 401(k), 403(b), and governmental 457(b) plans to offer higher catch-up contributions for participants aged 60 to 63:
- Increased Limit: In 2025, eligible individuals may contribute the greater of $10,000 or 150% of the regular catch-up limit, adjusted for inflation.
- Current Catch-Up Limits: The regular catch-up limit for those under age 60 is $7,500, so those aged 60-63 can contribute approximately $11,250. While not required, plan sponsors may opt to amend their plans to include this enhanced catch-up option, alongside the existing catch-up contributions for participants aged 50 or older. Check with your plan provider or HR department to see if your plan allows this.
Did you know the benefits of Traditional IRA and Roth IRA contributions are generally limited to those earning under a certain amount each year?
If you are currently contributing to a Roth IRA, or plan on it, and your anticipated adjusted gross income (AGI) for 2025 is more than $165,000 (single)/$246,000 (joint), then those contributions will not be allowed. You’ll want to work with your advisor and tax professional to correct any 2025 contributions made thus far.
If 2025 earnings are expected to be between $150,000 - $165,000 (single) or $236,000 - $246,000 (joint), you may want to hold off until later in the year or early 2026 to determine if you will be eligible to make at least a partial Roth IRA contribution. These are called “phase-out” ranges, where the eligible contribution amount is phased out as AGI approaches the higher numbers.
Making a deductible contribution to a Traditional IRA is a bit more nuanced, with multiple phase-out ranges. If you or your spouse participates in an employer-sponsored plan, there are adjusted gross income limits that could reduce the deductibility of contributions. You’ll want to connect with your advisor and tax professional to gain more insight into your specific situation.
Did you itemize your deductions?
Due to recent increases in the standard deduction, approximately 90% of taxpayers now use the standard deduction. What does this mean for you? If you are giving regularly to charities, but not enough to exceed the standard deduction (currently $30,000 for joint and $15,000 for singles), it may make sense for you to look at doubling up those contributions in one year to receive more tax benefits from your generosity. This is obviously not the primary motivation for most giving, but it’s certainly a bonus.
Let’s take Bill and Susan for example. They regularly give $24,000 each year to their church and other charities. Given the standard deduction of $30,000 in 2025, it is unlikely they will ever receive additional tax benefits from their gifts. If they decide to double up their gifts in 2025 to $48,000, they will receive $18,000 more in deductions in 2025. If they then do not give in 2026, their tax situation will not be impacted.
Ultimately, there are many small adjustments that can be done throughout the year to limit your payments to Uncle Sam. We do our best to keep you updated, though it’s always best to speak to your tax professional for more insight and to better understand your situation. Don’t have a CPA or accountant? We are happy to provide referrals!