Navigating the 2025 tax season: What you need to know about key IRS changes

As the 2025 tax season approaches, significant changes from the IRS could impact your financial planning, whether you file taxes individually or as a business owner. With policy adjustments under a new administration, ongoing legislative developments, and heightened enforcement measures, it’s crucial to understand how these changes may affect your taxes and finances.

IRS policy changes: Increased enforcement and modernization

The IRS is stepping up its game in 2025, especially when it comes to high-income earners and large corporations. They’re using new technology like artificial intelligence to spot errors in tax filings more accurately. This means keeping good records and following the rules is more important than ever.

Legislative outlook: Potential tax changes on the horizon

Washington is buzzing with talks of new tax laws. A big reconciliation bill is in the works that could change tax rates, deductions, and credits starting in 2025. Keep an eye on the news, as these changes could affect how you plan your finances.

What’s new for individual taxpayers

• Standard deduction and tax brackets: These numbers usually change each year to keep up with inflation. This could mean a different tax bill for you in 2025.

• Child and earned income tax credits: The extra help from pandemic times is mostly over. Make sure you know what you’re eligible for under the current rules.

• Student loan interest: If you have student loans, stay tuned for any changes in how you can deduct the interest.

• Retirement savings: You might be able to save more in your 401(k) or IRA in 2025. It’s a great way to lower your taxes and save for the future.

• Charitable giving: The special deduction for donations without itemizing is gone. If you give to charity, you might need to rethink your strategy.

Important updates for small business owners

• Tax Cuts and Jobs Act changes: Some business tax breaks from the 2017 tax law are ending. This could affect things like how quickly you can write off equipment purchases.

• State taxes: If your business operates in more than one state, keep an eye on each state’s tax rules. They might be changing too.

How to stay ahead of the game

For individuals:

• Check your tax withholding regularly to avoid surprises.

• Max out your retirement contributions if you can.

• Keep good records of your expenses, especially if you plan to itemize deductions.

• Consider tax-smart investing strategies.

For business owners:

• Talk to a tax pro about the best deductions and credits for your business.

• Use good accounting software to keep your books in order.

• Stay informed about IRS updates throughout the year.

• Plan ahead for tax law changes that might affect your business.

Looking to the future

The potential expiration of individual tax provisions from the Tax Cuts and Jobs Act in 2025 could significantly impact future tax planning. This means the tax landscape might look very different after 2025, affecting everything from tax rates to deductions for individuals and families.

Remember, staying informed and planning ahead is key to navigating these changes successfully. Whether you're an individual taxpayer or a small business owner, a little preparation can go a long way in managing your taxes effectively in 2025 and beyond.

• Mark Gallegos is a certified public accountant with Porte Brown Accountants & Advisors of Elk Grove Village.