2025 Tax Guide: Quick Takes for the New Year - Trust Point
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From an increased lifetime gift tax exemption to the new “Super” catch up for individuals aged 60-63, 2025 brings some updates to financial limits and policies. Below is a quick summary of some insights you will want to know for your finances in 2025.

Extending the 2017 Tax Cuts?

With majorities in the House and Senate, Republican lawmakers will likely look to extend the 2017 tax cuts from the Tax Cuts and Jobs Act (“TCJA”), which were set to expire at the end of 2025. Individuals should follow legislative updates to evaluate whether to adjust planning strategies in light of any proposed changes.

Additional Opportunities for Gifting

The lifetime gift tax exemption increases in 2025 by $380,000, to a new limit of $13,990,000 per person.1 Individuals who had previously exhausted their lifetime gifting exemption may now find capacity to remove additional assets from their taxable estate. The elevated exemption amount is scheduled to “sunset” at the end of 2025; however, a Republican-controlled Congress may look to extend the current exemption beyond December 31, 2025.

“Super Catch-up” Contributions for 401(k) / 403(b) / 457

SECURE Act 2.0 includes a new provision for 2025 which allows older individuals (age 60-63) to make a “super” catch-up contribution up to $11,250 to their 401(k)/403(b)/457 retirement plan.
Individuals must be age 60-63 by the end of the calendar year; otherwise, the age-50+ catch-up limit is $7,500.2

Corporate Transparency Act (CTA)…on hold

The Corporate Transparency Act was intended to curb illicit activities such as money laundering and tax evasion, with a requirement for beneficial owners of businesses, LLCs and other entities to file a report by January 1, 2025, with the U.S. Financial Crimes Enforcement Network (FinCEN). On December 3, 2024, a Texas-based federal court issued a nationwide injunction, blocking the U.S. Treasury Department from enforcing the provisions of the CTA.3

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Charitable “Bunching” Remains Effective

Given the sharp increase in the standard deduction under the Tax Cuts and Jobs Act (TCJA), charitably inclined taxpayers who itemize deductions should review the net tax savings from their charitable giving and should consider whether “bunching” a higher proportion in a single tax year could be beneficial.4 Utilizing a donor-advised fund or private foundation for this purpose can be an effective strategy.

Still-Elevated Interest Rates Provide Planning Opportunities

Advanced planning strategies such as Charitable Remainder Trusts (CRT) and Qualified Personal Residence Trusts (QPRT) may be viable planning opportunities amid still-elevated interest rates. With a CRT, a higher discount rate reduces the present value of the income to be received by the non-charitable beneficiary, which results in a greater tax deduction. With a QPRT, a higher discount rate lowers the gift value of the future remainder interest. As of December 2024, the Section 7520 rate (set by the IRS) stood at 5%.5

Intra-Family Loans Remain Popular

Given the significant difference between traditional mortgage rates and the applicable federal rate (AFR), intra-family loans remain popular. The national average rate for a 30-year fixed conforming mortgage stood at 6.73% as of December 11, while the long-term AFR (for loans longer than nine years) stood at 4.53% as of December.5,6

Have questions on any of these changes or are you ready to simplify and secure your wealth? The experienced professionals at Trust Point are here to help. Reach out to our knowledgeable team via the online contact us form or give us a call at 800-658-9474 to see how we can help you on your financial journey.

Related Resource: 2024 Tax Return Guide

Don’t let tax season be overwhelming. View our 2024 Tax Return Guide for important dates to know and for tips to ease the tax return process.

 

Sources:

1] IRS releases tax inflation adjustments for tax year 2025
2] USA Today – “IRS raises 401(k) contribution limits, adds super catch-up for 60-63 year olds in 2025” (November 3, 2024)
3] Varnum LLP – “Federal Court Enjoins Enforcement of the CTA Nationwide; Reporting Companies “Need Not Comply” with January 1 Deadline” (December 4, 2024)
4] Schwab Charitable – “Bunching Charitable Contributions”
5] IRS – “Section 7520 Interest Rates”
6] Bankrate.com – “Rates go down | Mortgage rates for December 11, 2024”
7] National Family Mortgage – “IRS Applicable Federal Rates”

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