What’s Next for Taxes in 2025? Potential Changes and Their Impact

As we move into 2025, tax laws are once again under scrutiny. With several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) set to expire and discussions around new tax policies gaining momentum, individuals and business owners need to be prepared for potential changes.

At Dylan Razzagone, CPA, we specialize in proactive tax planning—helping our clients stay ahead of tax law changes to maximize savings and avoid surprises. While nothing is set in stone yet, here’s what you should know about the possible tax shifts in 2025 and how they may impact you.

1. Expiration of the 2017 Tax Cuts and Jobs Act (TCJA) Provisions

One of the most significant tax concerns for 2025 is the scheduled expiration of key TCJA provisions at the end of the year. If Congress does not act, taxpayers could face:

• Higher individual tax rates – The top rate may increase from 37% back to 39.6%, and other brackets could also shift.

• A lower standard deduction – The standard deduction, which nearly doubled under the TCJA, may be cut in half.

• The return of personal exemptions – Previously eliminated, these could provide additional deductions per household member.

• A lower estate tax exemption – The current $13.61 million exemption per person may drop to around $5-6 million.

• Changes to the state and local tax (SALT) deduction – The current $10,000 cap may be lifted, which could benefit those in high-tax states.

  
  

How This Affects You:

🔹 Business owners may see changes in pass-through deductions and overall tax liability.

🔹 High-income earners should prepare for potential tax bracket shifts and estate planning adjustments.

🔹 Middle-income households might need to reassess deductions and tax credits to minimize their tax bill.

📌 Proactive Strategy: If these changes occur, planning ahead can help minimize your tax burden. Reviewing your deductions, credits, and estate planning strategies now could save thousands later.

2. Corporate and Small Business Tax Changes

Discussions continue around modifying corporate tax rates and small business deductions, including:

• A potential increase in the corporate tax rate from 21% to 25-28%.

• Changes to pass-through taxation, including the possible expiration of the 20% Qualified Business Income (QBI) deduction.

• New tax incentives for small businesses, which may help offset increased tax burdens.

How This Affects You:

🔹 Corporations may need to adjust pricing and profitability strategies.

🔹 S Corps, LLCs, and partnerships could lose the QBI deduction, increasing tax liability.

🔹 New business incentives may present opportunities for startups and growing businesses.

📌 Proactive Strategy: If you own a business, now is the time to reassess your structure and tax strategy. We can analyze whether an S Corp election, salary adjustments, or other planning tactics could help reduce your tax liability.

3. Potential Expansion of Tax Credits

Several tax credit expansions are being discussed, including:

• Child Tax Credit (CTC) increases – A possible rise from $2,000 to $3,600 per child under 6 and $3,000 for older children.

• Earned Income Tax Credit (EITC) expansion – Could include more eligible filers or higher benefit amounts.

• New education and housing tax credits – Potential tax breaks for student loan payments and first-time homebuyers.

How This Affects You:

🔹 Families with children could see increased tax refunds.

🔹 Low- to middle-income earners may qualify for larger credits.

🔹 Homebuyers and students may get new tax-saving opportunities.

📌 Proactive Strategy: Understanding which credits you qualify for and how to maximize them is crucial. We can help assess eligibility and integrate these benefits into your tax plan.

4. Estate Tax and Wealth Transfer Adjustments

If no action is taken, the estate tax exemption will be significantly reduced in 2026. Other proposed changes include:

• Lowering the lifetime gift tax exemption, making it harder to transfer wealth tax-free.

• Modifying step-up in basis rules, which could impact inherited assets.

• Possible increases in estate tax rates.

How This Affects You:

🔹 High-net-worth individuals need to plan for estate and gift tax changes.

🔹 Family-owned businesses could face new challenges in wealth transfers.

🔹 Inherited assets may be subject to increased taxation.

📌 Proactive Strategy: If you have significant assets, this is the time to evaluate trusts, gifting strategies, and other estate planning tools. We can help structure your plan to minimize future tax exposure.

5. Retirement and Investment Tax Adjustments

Discussions around retirement and investment taxation include:

• Raising the required minimum distribution (RMD) age beyond 73.

• Restrictions on Roth IRA conversions, particularly for high-income earners.

• Potential increases in capital gains tax rates, aligning them with ordinary income tax rates for high earners.

How This Affects You:

🔹 Retirees may need to adjust withdrawal strategies based on RMD changes.

🔹 High-income investors could face higher capital gains taxes.

🔹 Roth IRA users may need to reconsider conversion strategies.

📌 Proactive Strategy: If you rely on investments or retirement accounts, now is the time to review your portfolio and tax strategies to minimize the impact of potential changes.

6. IRS Layoffs and Potential Tax Season Delays

In a surprising turn of events, the IRS is laying off thousands of employees in the middle of tax season, potentially impacting processing times for tax returns and refunds. These layoffs are part of broader federal workforce reductions, affecting probationary IRS employees who were hired under recent expansions.

What’s Changing?

• Up to 15,000 IRS workers may be let go during peak tax season, particularly those without full civil service protections.

• The IRS had previously expanded its workforce to improve customer service and enforcement, but new budget cuts are reversing these efforts.

• The layoffs coincide with over 140 million tax returns being processed, raising concerns about potential slowdowns in refund distribution and audit response times.

• Employees working on tax filings are ineligible for buyout offers until after April 15, meaning fewer resources for tax processing in the short term.

How This Affects You:

🔹 Taxpayers expecting refunds may see delays if processing times increase.

🔹 Businesses and individuals undergoing audits could face longer response times from the IRS.

🔹 Customer service may suffer, making it harder to reach an IRS representative for assistance.

📌 Proactive Strategy: Filing early and ensuring that your tax return is complete and accurate can help you avoid processing delays. If you expect to owe taxes, planning ahead for estimated payments can reduce last-minute surprises. Working with a CPA ensures your return is properly prepared, minimizing potential IRS issues during a period of uncertainty.

Final Thoughts: Stay Ahead with Strategic Tax Planning

While none of these changes are final yet, tax law shifts can happen quickly. Waiting until 2026 to adjust your tax strategy could mean missed opportunities for savings.

At Dylan Razzagone, CPA, we specialize in proactive tax planning for individuals and business owners. Whether you’re navigating potential tax rate increases, business deductions, or estate planning changes, we can help you prepare now to minimize your tax burden later.

📌 Want to stay ahead of tax law changes? Schedule a consultation today to ensure you’re making the most of tax-saving opportunities in 2025 and beyond.

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