With the changes happening in Washington D.C., there is now some uncertainty about what tax policies we may see in 2025 and beyond. During this time of uncertainty, it is challenging to create a workable tax plan. But not to fear. There are several things that we DO know about tax changes to start 2025. Here are the key highlights as they are currently known.
What we DO know
Tax brackets and rates. The seven tax rates remain unchanged while the income subject to each rate got a slight bump. After a 5.4 percent increase in 2024, there’s an additional 2.8 percent increase in income subject to each tax rate in 2025. This means more of your income will be subject to a lower tax rate.
Higher retirement plan limits. The amount you can contribute to a 401(k) in 2025 is $23,500, up from $23,000 in 2024. The 401(k) catch-up contribution limit in 2025 stays at $7,500 if you’re age 50 to 59, and age 64+. New in 2025, if you are ages 60 to 63, the catch-up contribution limit increases to $11,250. The annual contribution threshold for IRAs remains at $7,000, as does the IRA catch-up contribution limit of $1,000.
New cryptocurrency reporting rules. New reporting rules in effect as of January 1, 2025 means you’ll need to be more vigilant with tracking your cryptocurrency transactions and complying with the IRS’s digital asset rules. Brokers of digital assets, including cryptocurrency exchanges, custodial services, and certain payment processors, must report sales and exchanges of digital assets to the IRS starting in 2025. Your digital asset transactions will be summarized annually on a new Form 1099-DA. This new reporting of digital asset transactions will be similar to existing reporting for traditional securities such as stocks and bonds.
Changes on the horizon
The 1099-K reporting threshold. If you use third party payment processors like Venmo or sell tickets on apps like SeatGeek, you’re more likely to receive a tax form of your activity that will also be sent to the IRS. The limit requiring your activity to be reported was $5,000 in 2024. In 2025, this threshold is scheduled to be lowered to $2,500, and further lowered in 2026 to $600.
Uncertainty over TCJA provisions. There has been discussion about extending and/or making permanent many of the provisions contained in the Tax Cuts and Jobs Act (TCJA) of 2017. Most of the provisions are scheduled to expire at the end of 2025, so we will pay attention to any legislation forthcoming that could change any of this tax landscape.
Proposed decrease in corporate tax rates. There is also discussion about lowering the corporate tax rate from its current level of 21%, in addition to lowering the effective corporate tax rate from 21% to 15% for domestic manufacturers.
Stay tuned for continuing updates of any tax changes as events unfold in 2025.
Navigating the tax system can be challenging for everyone, whether you’re an adult who hasn’t paid much attention to paycheck deductions or a young person starting your first job. A crucial first step in managing taxes is knowing when to seek help, which begins with understanding what can be taxed.
Here are some key points to help you or someone you know better understand the basics of our tax system.
Different types of taxes
When you think about taxes, income tax is often the first to come to mind. Income tax is what you pay on the earnings from your job or from selling products and services. However, many other types of taxes exist. Here are some of the most common:
Payroll Taxes. Unlike income taxes, which can fund various government programs, payroll taxes specifically support Social Security and Medicare. This tax amounts to 15.3% of most employees’ paychecks, but half is typically covered by the employer.
Property Taxes. These taxes are applied to property ownership, such as your home or vacation property.
Sales Tax. This tax is levied on goods and services you purchase. While state and local governments primarily collect sales taxes, certain items like gasoline are also subject to federal sales taxes.
Capital Gains Taxes. If you sell an investment or property for a profit, you may owe capital gains taxes. Selling stocks, homes, or rental properties at a profit could trigger these taxes.
Estate Taxes. These are taxes applied to the assets within your estate after you pass away.
Inheritance Taxes. As opposed to estate taxes, inheritance taxes are applied when you inherit money or assets after someone else passes away.
Not all income is taxable
While most of your income is taxable, some forms of income are exempt from taxation:
Interest from municipal bonds is generally tax-free.
Life insurance benefits often aren’t taxed.
Capital gains on the sale of your primary residence may be excluded up to a certain limit.
Estate tax exclusions mean only estates exceeding a set dollar amount are subject to tax.
Many employee benefits, such as health insurance, Health Savings Account (HSA) contributions, commuter benefits, and small employer-provided gifts, are also tax-free.
The tax rules governing these various types of income can be complex. That’s why it’s often helpful to have a professional guide you through your particular situation. Having a basic understanding of how taxes work, though, will help you to ask the right questions.
Inflation isn’t the only reason why your wallet or purse feels lighter these days. Sneaky fees are finding their way into things we buy every day. Here are some common fees you may encounter and what you can do to avoid them altogether.
Common areas with sneaky fees
Checking account fees. Banks love to nickel and dime you with fees if you don’t maintain a minimum balance or have sufficient direct deposits. It creates a gotcha moment at the end of the month.
Dealership fees. Buying a vehicle? Dealers are known for tacking on hidden charges like vehicle prep fees. These can easily inflate the sticker price if you’re not paying attention.
Ticket broker fees. Concert or sports event tickets seem expensive enough, but when ticket brokers add an additional service fee, it’s almost enough to make you stay home. These fees can be up to several hundred dollars!
Vacation rental fees. Dreaming of a vacation getaway? Convenience fees, cleaning fees, and other add-ons can push the cost of your vacation rental sky-high, turning your relaxing trip into a financial drain.
Smart moves to outsmart sneaky fees
Here’s how you can fight back.
Understand the fees before you start. For example, when you are considering a rental, get a breakdown of all the fees before you book. The same holds true for buying a car or a plane ticket. The vendors technique of hiding fees to make a service look cheaper does not need to work when you buy.
Negotiate like a pro. Ask questions or challenge fees you don’t understand. Whether it’s a merchant, a car dealer, or a bank, there’s often room to negotiate. You might be surprised how often they’ll waive the fees just because you ask.
Switch providers. Many companies charge for services that others offer for free. Tired of your bank’s account fees? Look for one with a truly free checking account—because yes, they do exist.
Cut out the middleman. Avoid unnecessary fees by dealing directly with providers. For example, if you’re booking a vacation rental, skip platforms like Airbnb that charge a convenience fee and book directly through the owner when possible.
Say no. Sometimes the best way to save is simply not to buy. If a purchase or service comes with fees that seem outrageous, you can always walk away. By saying no, you send a message to companies that you won’t tolerate being taken advantage of—and you’ll save money in the process.
By knowing how to spot and challenge these fees, you can stop the drain on your wallet and take back control of your finances. After all, it’s not just about cutting costs—it’s about standing up for yourself and your money.
At its heart, technology exists to solve problems and enrich our lives, but its journey is rarely straightforward. The rapid integration of Artificial Intelligence (AI) into everyday tools—like search engines, smart speakers, and virtual assistants—perfectly illustrates the challenges that come with disruptive innovation. Here’s a quick look at how AI is improving our lives, but where we also need to take a step back to be more cautious.
The upside of AI: Empowering efficiency
Has instant access. Unlike humans who are prone to distractions, emotions, or getting tired, AI can operate without any such issues. Since it’s powered by algorithms, human-related points of failure such as stress-induced errors are virtually eliminated.
Accelerates data processing. AI can quickly sift through vast amounts of data, pinpointing inconsistencies, outliers, and trends in seconds. Tasks that would take a human hours, if not days, are reduced to mere moments, allowing us to focus on higher-level analysis and decision-making.
Always available for automated tasks. AI automates repetitive tasks, cutting down on administrative busy work and freeing up our time for more complicated tasks. It’s also always available – wherever you have an internet connection.
The downside of AI: Tread carefully
Plagiarism is likely to occur. AI doesn’t care if the information it creates is owned by someone else. This plagiarism can happen when creating music, text, voiceovers, and other forms of creative expression.
AI blends truth AND fiction. While AI excels at many things, fact-checking and proper citations aren’t among them. Like Wikipedia, AI can be a useful starting point but shouldn’t be trusted as a sole authority. AI’s outputs may include inaccuracies, making it unreliable for in-depth research or professional use.
Lacks true creativity. AI may do a great job to organize and repackage information, but it still falls short when it comes to true innovation. Creativity, by nature, is abstract and requires out-of-the-box thinking that AI has yet to master. Its outputs are rooted in existing data, meaning that groundbreaking ideas remain out of reach.
Reduces critical thinking skills. While technology often makes life easier, it can also make us mentally lazier. Think about how difficult navigating a new city would be without GPS! Similarly, if we become overly reliant on AI for decision-making, our critical thinking skills may weaken over time, leading to a decline in actual human intelligence.
Can lead to serious legal and tax issues. Relying on AI for legal, tax, or other professional advice can leave you in hot water. While AI may be appropriate for initial research on a particular issue, remember that AI itself isn’t a registered attorney or tax preparer. You should still rely on the knowledge and experience of professionals when advice is needed.
The verdict: Use AI as a tool, not a crutch
AI has the potential to be a powerful tool to complement our own human ideas and capabilities. It’s far from ready, though, to be the sole source of truth. Like any emerging technology, it should be approached with both curiosity and caution.
MYTH: /miTH/ (noun) – a widely held but false belief or idea
Many myths about the IRS and the tax code have been amplified online in recent years. Here are several myths that if you believe them, could leave you with an expensive tax surprise.
Myth #1: Retirement money is always tax free.
You have retired and withdraw from a 401(k) fully expecting that you won’t owe income taxes. Unfortunately, money withdrawn at any age from a 401(k) – or your traditional IRA – incurs income taxes at your current tax rate.
Lesson Learned: Understand how money in each of your retirement accounts is taxed when withdrawn. Some will have income taxes, some could incur early withdrawal penalties, while some incur no tax at all!
Myth #2: The government won’t find out about a big gambling win.
Gambling winnings are considered taxable income to the feds and most states. The IRS generally wants about a quarter of your winnings from sweepstakes, casinos, bingo, keno, online sports betting, and the like. Casinos and other betting entities also inform the IRS of your winnings over certain thresholds. So it is always best to keep track of your winnings.
Lesson Learned: Gambling winnings fall under tax rules just like other forms of income. Deducting gambling losses is possible, but it has limits that are subject to strict rules. For example, you must itemize deductions on your tax return if you don’t declare yourself a self-employed professional gambler.
Myth #3: Government benefits like unemployment and Social Security aren’t taxable.
Unfortunately, unemployment and Social Security benefits are usually taxable. Unemployment benefits are taxed at your normal tax rate as income at the federal level and in some states. Social Security is taxed, but in a much more confusing way. Supplemental Security Income payments, on the other hand, are not taxable.
Lesson Learned: Plan ahead to mitigate the tax shock. You can have taxes withheld from your unemployment benefits so you don’t have to pay a lump sum when you file your return. With Social Security benefits, understand when and how they can be taxed, since up to 80% of these benefits could be subject to income tax by the federal government.
Myth #4: I work from home and can write off my office expenses.
You can only deduct home office expenses if you operate a business out of your home. If you’re an employee, you’re out of luck. If you do run a business exclusively out of your home, there are still hurdles to clear before you qualify to use the home office deduction.
Lesson Learned: Tax rules can be complicated, even for something that seems as simple as a home office deduction.
If there’s one common theme here, it’s that tax laws can be complex even when they seem simple on the surface. When in doubt ask for help.
