2025 Tax Law Changes 

A new year often brings with it numerous federal tax and state tax changes which can greatly impact your financial planning for the year. Watkins & Co. is here to break down the anticipated tax law changes for 2025 and ensure that your tax knowledge is current so that you can make fully informed financial decisions this year. 

Federal Tax Law Changes 2025

Are you wondering, “Will personal exemptions come back in 2025?” Or, “What are the standard deductions in 2025?” You’re on the right track. In 2025, there are a few key considerations for upcoming tax changes that may play a large role in your tax planning.

The main 2025 federal tax changes revolve around the Tax Cuts and Jobs Act (TCJA) which was enacted in 2017 and which changed deductions, expensing, depreciation, and tax credits for individuals and businesses. At the end of 2025, TCJA is set to expire which means that without any legislative action, the end of this year will bring with it a reversion back to federal tax laws before TCJA was passed. What does this mean for you?

• Individual tax rates will revert back to levels before TCJA which will result in the top rate increasing from 37% to almost 40%.
• Standard deductions and personal exemptions were doubled and when TCJA expires, the standard deduction will decrease and taxable income calculations will increase. Essentially, you’ll be paying higher income taxes and the standard deduction will go down.
• An entire slew of deductions and depreciation factors were adjusted in TCJA to be more friendly to the individual or business. With TCJA ending, many of these are reverting back to original rates which will ultimately affect both personal and business bottom lines.
• Businesses will lose many of their tax credits that worked in their favor with TCJA. 

This entire year, we can all enjoy the benefits TCJA brings but planning for the expiration of this provision is essential. What we’ve shared here is simply a general overview of the tax reforms that you can expect. For more information on the changes that will come at the end of this year with the expiration of the Tax Cuts and Jobs Act, contact your tax professional at Watkins & Co. We can break down the ins and outs of the changes for you and determine which aspects may affect you the most. Most importantly, we can help you plan for these changes and minimize the impact of the TCJA expiration.

Tax Reforms for 2025

Other notable changes for the 2025 tax year are also important to consider. Standard deductions increase to $15,000 for individuals and joint filings increase to $30,000. Heads of household can expect $22,500 for the standard deduction in 2025. For this year, the top tax rate remains at 37% (but will increase to around 40% when TCJA expires). There are also changes to the alternative minimum tax exemption amounts, earned income tax credits, qualified transportation fringe benefit, health flexible spending cafeteria plans, medical savings accounts, foreign earned income exclusion, estate tax credits, annual exclusion for gifts, and adoption credits. Most changes this year work in the favor of the individual or business. To learn more about the tax changes this year and how they may affect you, contact our team at Watkins & Co. 

Our experienced tax accountants are standing by, ready to assist you with tax planning for the upcoming year. Watkins & Co. is here as your reliable partner in ensuring your financial future is stable and solid for this year and years to come. 

2 tax law changes that may affect your business’s 401(k) plan

When you think about recent tax law changes and your business, you’re probably thinking about the new 20% pass-through deduction for qualified business income or the enhancements to depreciation-related breaks. Or you may be contemplating the reduction or elimination of certain business expense deductions. But there are also a couple of recent tax law changes that you need to be aware of if your business sponsors a 401(k) plan. (more…)