As you begin to collect documents for your 2024 return, now is a good time to also plan for next year’s tax filing.
There are planned changes for the 2025 tax return due to inflation adjustments. Other tax law changes are expected to be passed over the next couple of months with Republicans in control of both the White House and Congress. With that in mind, lets go over some 2025 tax limit Q&As.
I haven’t been able to itemize deductions on my last few tax returns. Will I qualify for 2025?
Starting in 2018 with the acceptance of the Tax Cuts and Jobs Act, the increase of the standard deduction made it so the ability to itemize deductions was irrelevant. The total of your itemized deductions would need to be larger than your standard deduction to be able to claim it. Look at the chart below to see if you should expect to itemize or use the standard deduction for 2025:
2024 Standard Deduction | 2025 Standard Deduction | |
|---|---|---|
Single | $14,600 | $15,000 |
Married (Jointly) | $29,200 | $30,000 |
Head of Household | $21,900 | $22,500 |
If I don’t itemize deductions, can I claim charitable deductions on my 2025 return?
As charitable deductions are included your itemized deductions total, you cannot claim the standard deduction and charitable deductions.
How much can I contribute to an IRA for 2025?
You are able to contribute up to $7,000 a year to a traditional or Roth IRA, if you’re eligible. You can contribute up to 100% of your earned income if you make less than $7,000 throughout the year, this doesn’t change from 2024. For 2024 and 2025, you can also make a $1,000 additional “catch-up” contribution if you’re 50 or older.
I have a 401(k) plan with my employer. How much can I contribute to it?
You can contribute up to $23,500 to a 401(k) or 403(b) plan for 2025, up from 2024 at $23,000. The additional catch-up contribution will be the same for 2024 and 2025 at $7,500 if you’re 50 or older. New for 2025, if you’re 60-63 you can make up to $11,250 of catch-up contributions.
I occasionally hire a nanny (homecare worker). Am I required to withhold and pay FICA tax on the amounts I pay them?
The threshold for a domestic employer that is required to pay FICA for an independent contractor (homecare worker, babysitter, etc.) is $2,800 for 2025, up from $2,700 in 2024.
How much of my earnings are taxed for Social Security in 2025?
Even though you must pay Medicare tax on all amounts earned, you will only pay Social Security tax on $176,100. Up from $168,600 in 2024, you don’t owe any Social Security tax on amounts earned above the first $176,100 for 2025.
How much can I give to one person without triggering a gift tax return in 2025?
Up from $18,000 in 2024, the 2025 annual gift exclusion is $19,000.
How will the changes in Washington affect taxes this year and in the future?
Just like anything else, there is no way to predict the future in tax laws. Changes depend largely on the current political and economic factors.
There are many changes we are expecting to happen over the next few years. The Tax Cuts and Jobs Act is currently expiring after 2025, but the Republicans are talking about extending or even making them permanent. Other proposals include; raising or eliminating the state and local tax deduction cap, making certain income tax-free (tips, overtime and Social Security benefits), and expanding the Child Tax Credit. Some of these, and others, could take effect as soon as the 2025 tax year.
These are only some of the known and potential changes that could affect you. Contact your Wegner Tax Advisor if you need more information or have any questions.
