Get Ready for Tax Season: Key Changes and Tips
As tax season approaches, you might be gearing up for the daunting task of gathering records in anticipation of your tax meeting—whether that’s face-to-face, through videoconferencing, or over the phone. The ease of this task largely hinges on how well you’ve kept up with your records over the year. Regardless of your record-keeping prowess, being fully ready for your tax return preparation allows us more time to:
Identify every potential legal deduction;
Analyze the best income reporting methods and deductions suited to your circumstances;
Consider recent changes in tax law affecting your status;
Discuss tax planning strategies that could lower your future tax burdens.
New for 2025 – This year, the One Big Beautiful Bill Act (OBBBA) brings several notable changes, including:
No Tax on Tips: You can now deduct up to $25,000 in qualified cash tips if you're in a customary tip-receiving job. The deduction decreases for AGIs over $150,000 for singles and $300,000 for joint filers, at a rate of $100 for every $1,000 over. It's available to all filers. Employers will declare qualifying tips on Form W-2.
No Tax on Qualified Overtime: Claim deductions up to $12,500 ($25,000 for joint filers) for overtime exceeding your regular rate. This deduction fades out for MAGIs over $150,000 (singles) and $300,000 (joint filers).
Vehicle Loan Interest Deduction: Deduct up to $10,000 in interest on post-2024 loans secured by a new personal-use vehicle. The deduction phases out for incomes between $100,000-$150,000 (single) and $200,000-$250,000 (joint filers). Look for Form 1098-VLI or its substitute this year.
SALT Deduction Limit: The state and local tax (SALT) deduction cap escalates to $40,000, decreasing for incomes over $500,000, tapering to $10,000 at $600,000.
Super Retirement Catch Up: In 2025, those aged 60-63 can contribute more to retirement plans. The increased levels depend on the plan type, boosting retirement savings opportunities.
Child Tax Credit: The OBBBA raises this credit to $2,200 per child under 17, with $1,700 refundable, phasing out at $400,000 MAGI for joint filers and $200,000 for singles.
Adoption Credit: In 2025, the adoption credit stands at $17,280, with $5,000 refundable, increasing slightly with inflation the following year.
Section 179 Expensing: This allows businesses to immediately depreciate qualifying assets like machinery and certain vehicles, up to $2.5M, phasing out after $4M in purchases.
Bonus Depreciation: Permanently allows businesses to deduct 100% of the cost of qualifying assets placed in service post-January 19, 2025.
Business Research or Experimental Expenditures: From 2025, domestic costs are fully deductible, although foreign costs are still amortized over 15 years.
Choosing Your Best Alternatives – Various methods exist for reporting income and deductions. The selections you make not only influence your current return but future ones as well. Some topics to explore include:
Sales of Property: Options include reporting all gain in the sale year or spreading it across received payments.
Depreciation: You may choose to depreciate or immediately expense business asset costs, subject to certain scenarios.
Where to Begin – Start organizing your tax documents early in January. Whether meeting in-person or remotely, maintain a secure place, like a file drawer or safe, to store records. If documents arrive electronically, print them out unless otherwise advised. Other tips:
Organize records by income and expense categories. Keep medical receipts, mortgage interest, and charitable donations filed separately. Complete any organizer or questionnaire thoroughly to avoid missing transactions.
Highlight any foreign assets or accounts. International finances may attract specific reporting requirements and penalties when neglected.
Monitor cryptocurrency dealings closely, as the IRS now requires brokers to report digital asset transactions on new Form 1099-DA.
In case of health insurance obtained through a marketplace, ensure Form 1095-A is with your documents, assisting in adjusting the premium tax credit.
Sort income statements separately, such as W-2s, 1099s, and K-1s. Always bring these to your appointment.
Note any questions as they arise to address them promptly. Compare current and past year deductions to ensure nothing is overlooked.
If there are unfamiliar documents or items of interest, bring them for clarification.
Accuracy in Details – Check the accuracy of personal data like names, addresses, and Social Security numbers from prior returns. Note any changes for this year. While not mandatory, providing your phone and email can expedite communication during preparation.
Marital Status Change – If your marital status changed this year, bring relevant legal documents. In the event of a spouse's passing, ensure access to any trust agreement or will.
Dependents – Ensure Social Security numbers and birth dates for all dependents are on file. If there's any doubt about someone's dependency, tally support amounts provided versus their income.
Transactions Needing Attention – Certain activities require unique treatment on tax returns. Examples include:
Sales of Stock or Property: Each transaction requires details like purchase/sale dates and prices. Bring necessary documents.
Gifted/Inherited Property: Details like the original owner's purchase and death dates are crucial.
Reinvested Dividends: Track each stock purchase with reinvested dividends.
Home Sale: Record sale gains, improvements, and keep closing documents handy for primary residences.
New Home Purchases: Present closing statements if purchased in 2025.
Vehicle Purchase: If acquiring a new plug-in electric car before September 2025, a special credit may apply.
Home Energy Expenditures: Qualified systems might entitle you to energy-related credits. Bring purchase documents and certifications.
Energy-Saving Modifications: A tax credit of up to 30% of costs is available for eligible home improvements.
Identity Theft: Immediate reporting is advisable to utilize IRS aid if you suspect identity theft's impact on your taxes.
Business Car Expenses: Keep detailed mileage logs and separate vehicle costs. Provide numbers to calculate business deductions.
Charitable Donations: Substantiate cash contributions with bank records or charity documentation. Include specifics for donations over $500.
If something unique occurred this year that might influence your tax return, reach out to us. We’ll clarify what documentation will be needed. Should you have questions regarding your tax data, feel free to call us. We're here to assist you step by step through the process.
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