As we embark on a new year, it’s essential to stay informed about the latest tax developments that may impact your financial strategies. Below are the most recent updates and considerations for individuals and families:
1. Increased Contribution Limits for Retirement Accounts
For 2025, the IRS has raised the contribution limits for retirement plans:
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- 401(k) Plans: The annual limit is now $23,500, with an additional $7,500 catch-up contribution for individuals aged 50 and older. For individuals between 60 and 63, the catch-up amount is $11,250.
- IRAs: Contributions remain at $7,000, with a $1,000 catch-up limit.
Consider maximizing these contributions to reduce taxable income while growing your retirement savings.
2. Estate and Gift Tax Adjustments
The federal estate tax exemption has increased to $13.99 million per individual ($27.98 million for married couples). The annual gift tax exclusion has also been raised to $19,000 per recipient. These changes present opportunities for wealth transfer strategies that minimize tax liability.
3. Proposed Changes to Capital Gains Tax Rates
While the current long-term capital gains tax rates remain at 0%, 15%, and 20%, Congress is discussing potential adjustments for high-income taxpayers. If enacted, these changes could increase tax rates for gains above $1 million. Consider reviewing your investment portfolio with us to prepare for any potential changes.
4. Enhanced IRS Enforcement for High-Income Earners
The IRS has announced increased audits for individuals with annual incomes exceeding $400,000. Ensuring proper documentation and compliance is more critical than ever. Let us assist you with proactive planning and audit prevention.
Action Steps for Early 2025
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- Schedule a review of your 2024 tax return to identify additional savings opportunities.
- Update your estate plan to align with the new exemption limits.
- Evaluate charitable giving strategies, including the use of donor-advised funds, to maximize deductions.
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Stay Ahead with Expert Guidance. Partnering with us ensures that you’re prepared for whatever changes come your way in 2025. We’re here to help you navigate these changes and optimize your tax strategy. Contact us at theKFORDgroup to schedule a consultation.