By: Thomas Van Blunk
With tax season quickly approaching, our goal is to provide you with the recent tax law updates for the optimal filing of your 2025 tax return.
Flexible Spending Arrangements (FSA)
The Flexible Spending Arrangement (FSA) allows employees to set aside pre-tax funds for medical expenses, with employers managing the accounts. For the 2025 tax year, the contribution limit has increased by $100, enabling employees to contribute up to $3,300 to their FSA. Additionally, the carryover provision allows employees to carry over up to $660 into the following tax year.
When considering how to use FSA funds, there are various options available. These funds can be used to cover expenses not included in your current health plan, such as routine checkups, eye exams, and dental visits.
Health Savings Account (HSA)
Contributing to a Health Savings Account is very important to help cover healthcare costs with contributions being tax free. The HSA contribution limits for 2025 are $4,300 for self-only coverage and $8,550 for families. If you are of age 55 or older, you are eligible to contribute an additional $1,000 for a catch-up contribution.
1099-K Threshold Goes Back to $20,000
The 1099-K Form is essential for reporting payments made through transaction apps such as Venmo, PayPal, and similar platforms. The One Big Beautiful Bill brought back the rule where third-party platforms were required to issue Form 1099-Ks to taxpayers who received over $20,000 and made 200 or more transactions through these apps. This reverses the change introduced by the American Rescue Plan Act of 2021 which was to lower the reporting threshold to $600.
Bonus Depreciation Write-Offs for Businesses
Effective starting in 2017, the Tax Cuts and Jobs Act allowed business owners to write off 100% of the cost of qualified assets purchased between September 27, 2017, and January 1, 2023. Beginning in 2023, the percentage of bonus depreciation available started to decrease by 20% each year. The One Big Beautiful Bill restored the 100% bonus depreciation for the cost of qualified assets purchased after January 19, 2025. This means that for the 2025 tax year, 40% of the cost of qualifying assets can be written off as bonus depreciation from January 1, 2025, to January 18, 2025, and then form January 19,2025 to the present, 100% of the cost of qualifying assets can be written off as bonus depreciation.
Catch-Up Contributions
Catch-up contributions are additional retirement savings contributions that allow individuals aged 50 and older to make extra payments to their ROTH individual retirement accounts (IRAs) and Traditional IRAs. For the 2025 tax year, individuals in this age group can contribute up to $8,000. This strategy enables qualified workers to reduce their taxable income by utilizing pre-tax contributions.
| Age / Eligibility | Standard Contribution | Catch-Up Contribution | Total Maximum (2025) |
| Under 50 | $7,000 | — | $7,000 |
| Age 50 or older | $7,000 | $1,000 | $8,000 |
Catch-up contributions are also available for company sponsored 401(k). Similar to the Roth and Traditional IRAs, individuals aged 50 and older can make extra payments to the 401(k)s. By utilizing catch-up contributions, eligible individuals can boost their retirement savings and strengthen their long-term financial preparedness.
| Age / Eligibility | Standard Contribution | Catch-Up Contribution | Total Maximum (2025) |
| Under 50 | $23,500 | — | $23,500 |
| Age 50 or older | $23,500 | $7,500 | $31,000 |
| Age 60-63 | $23,500 | $11,250 | $34,750 |
Tax-Loss Harvesting (TLH)
If you have an investment that has decreased significantly in value, tax-loss harvesting could be a valuable strategy for you. This approach involves selling an investment at a loss, reinvesting the proceeds, and using additional tax savings to your advantage. Tax-loss harvesting helps reduce capital gains taxes by selling underperforming investments and replacing them with similar assets. The benefits include offsetting capital gains, reinvesting the tax savings, and lowering your taxable income, potentially resulting in savings on your 2025 tax return. It is important to be mindful of the “Wash-Sale Rule,” this prohibits repurchasing the same or similar securities within 30 days before or after the sale.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is designed to support individuals and families with low to moderate incomes. It is a refundable credit, meaning it can reduce the amount of taxes owed or increase your tax refund. For the 2025 tax year, the credit amount ranges from $649 to as much as $8,046, depending on your circumstances. You may qualify if you meet the following criteria: you have earned income, investment income below the set limit, a valid Social Security number, are a U.S. citizen, and have not filed Form 2555 for Foreign Earned Income.
Child Tax Credit
The Child Tax Credit is an effective way to increase your refund if you qualify. For individuals earning less than $200,000 annually and joint filers with a combined income under $400,000, the credit is $2,200 for each dependent under the age of 17. It is important to note that up to $1,700 of the Child Tax Credit is refundable.
Education Savings Bond Program
The education savings bond program allows qualified taxpayers to exclude income earned from eligible Series EE and Series I bonds issued after 1989. To qualify, the bond owner must be at least 24 years old at the time of purchase. Additional eligibility requirements include having a modified adjusted gross income (MAGI) between $99,500 and $114,500 for individuals, or between $149,250 and $179,250 for those filing jointly. If your MAGI exceed these thresholds, ($114,500 for individuals or $179,250 for joint filers) you must include all interest in your income.
Earnings from these bonds can be used to pay education expenses for the bond owner, spouse, or dependent. This program offers a valuable opportunity for families to save for education costs while potentially benefiting from tax savings through interest deductions.
Student Loan Interest Deduction
If you have student loans, you may qualify for a student loan interest deduction. For the 2025 tax year, this deduction begins to phase out if your MAGI is between $85,000 and $100,000 for individuals, or between $170,000 and $200,000 for joint returns. You are not eligible to claim the deduction if your MAGI exceed $100,000 individually, or $200,000 jointly.
Adjustments for Inflation
The changes in standard deductions are as listed:
| Filing Status | 2024 Tax Year | 2025 Tax Year | % Increase |
| Single | $14,600 | $15,750 | 7.9% |
| Married, filing separately | $14,600 | $15,750 | 7.9% |
| Married, filing jointly | $29,200 | $31,500 | 7.9% |
| Head of household | $21,900 | $23,625 | 7.9% |
The 2025 tax brackets are as follows:
| Tax Rate | Single | Married, filing separately | Head of household | Married, filing jointly |
| 10% | $0 to $11,925 | $0 to $11,925 | $0 to $17,000 | $0 to $23,850 |
| 12% | $11,926 to $48,475 | $11,926 to $48,475 | $17,001 to $64,850 | $23,851 to $96,950 |
| 22% | $48,476 to $103,350 | $48,476 to $103,350 | $64,851 to $103,350 | $96,951 to $206,700 |
| 24% | $103,351 to $197,300 | $103,351 to $197,300 | $103,351 to $197,300 | $206,701 to $394,600 |
| 32% | $197,301 to $250,525 | $197,301 to $250,525 | $197,301 to $250,500 | $394,601 to $501,050 |
| 35% | $250,526 to $626,350 | $250,526 to $375,800 | $250,501 to $626,350 | $501,051 to $751,600 |
| 37% | $626,351 and higher | $375,801 and higher | $626,351 and higher | $751,601 and higher |
Source: Federal income tax rates and brackets | Internal Revenue Service
Conclusion
When filing your 2025 tax return, it is important to consider the listed information to optimize your tax return. The tax strategies outlined above are for informational purposes and should not be solely relied upon for tax, legal, or accounting guidance. While applying for any of these strategies may benefit you, it is always recommended to seek advice from a professional before proceeding with any transactions. Contact Lear & Pannepacker with any questions you may have.
