The 2025 Tax Changes That Could Save You Money

Before you file your tax return for this year, listen up a few important changes. Could put money back in your pocket. Be sure you're not missing out. And tune in as we break down the key updates to the 2025 tax code. And just a spoiler alert, not all of the changes will save you money. Hi, I am John Gigliello, Certified Financial Planner with the Albany Financial Group, and you're listening to Invest in Knowledge, a podcast for people who are planning for retirement or already retired and wanna know more about such topics as proactive tax planning, retirement income planning, social security, timing, investment management, and asset protection. After life altering issue. At age 39, my calling in life became clear to share my knowledge of personal finance with people who are looking to make smart and responsible choices with their money. Now, tax season is officially underway, so let's take a look at the changes for this filing season.

Overview of 2025 Tax Season

Some may save you money, but again, some may not. Even though Congress did not make major changes for this year, there are some new details to be aware of, especially for those who sell things online, bought an electric vehicle, or who prefer to get their refund as a savings bond. Before we get started, please remember that the rules for income taxes are complex and they change a bit every year, including inflation adjustments for tax brackets and the standard deduction. Bigger changes may be in store for next year and beyond, depending on how President Trump and Congress addresses the fate of the 2017 Tax Cuts and Jobs Act, which sunsets at the end of this year. Filing taxes may also be a little less cumbersome this year since the IRS upgraded its online services by adding features and making it easier to check the status of refunds.

Tax Filing Costs and Refund Trends

Did you know that it takes taxpayers an average of 13 hours and $290 to prepare and file their tax returns according to the IRS, but the time and money seems to have paid off last year? Tax refunds averaged $3,138 according to the IRS taxpayers who file electronically and choose direct deposit should get their payments within 21 days. And just a side note, I'm not a big fan of large tax refunds, and I'll tell you why. I know some people view it as forced savings, but remember that you are essentially giving the US Treasury an interest free loan for a year. Wouldn't you rather have control of your money earning interest for that time period?

Standard Deduction Updates

But now onto some of the key tax changes for this year, the standard deduction has increased along with other annual inflation adjustments for married couples filing jointly. The standard deduction is $29,200, which is a $1,500 increase from last year.

For single filers, the deduction is $14,600 and for a heads of household $21,900. Now, the IRS estimates that 87 to 90% of tax filers claim the standard deduction rather than itemizing their deductions. Remember though, for New York State residents, the state has decoupled from federal itemized deduction rules in response to the Tax Cuts and Jobs Act of 2017. This means that while most taxpayers take the standard deduction federally, they may still benefit from itemizing deductions on their New York state return. If you need more information on that, just send us a note.

Online Sales and Form 1099-K Changes

If you sold anything online, you might receive a form 10 99 K income you receive from online sales of concert tickets and other goods and services is generally taxable. The threshold for platforms like PayPal, eBay, and Etsy to send out those 10 99 Ks to people dropped from $20,000 to just $5,000 for tax year 2024.

A copy also goes to the IRS, which means that millions more Americans will get the forms to make sure they report the income on their income tax returns. Whether you get a 10 99 K or not, if you are in business, you need to report the income on your tax return. If you get one for selling personal items like stuff in your basement for a loss, you wouldn't owe any tax, but you would need to disclose the sale to the IRS. If you sold personal items for a gain, you are required to report it and pay any taxes due.

Electric Vehicle Tax Credits

If you bought an electric vehicle in 2024, you may qualify for a tax credit, but be careful. You may also owe money as well. Many electric vehicle buyers took a $7,500 tax credit at the dealership at the time of sale, effectively an instant discount, but you have to actually be eligible to take that credit, so they still need to report the purchase on their tax returns to prove that they were indeed eligible for the credit. If it turns out that their income is over the income limits for the credit $300,000 for married couples filing jointly and $150,000 for single filers and $225,000 for those filing as head of household, they will owe the credit back to the IRS with their tax filing.

Disaster Relief Provisions

Now, filers in disaster relief areas may be eligible for extended deadlines. Taxes for the 2024 returns are due April 15th for most filers, however, the roughly 10 million taxpayers who live in Los Angeles County, for example, have an extension until October 15th to file and pay to help those recovering from the recent wildfires. They also can delay paying quarterly estimated taxes if needed. Taxpayers in certain 2024 disaster areas might benefit from disaster relief under 2024 returns or by amending their 2023 returns. A tax law passed in December also helps victims of certain disasters through the years 2020 through 2024 claim losses on their tax returns above previous limits. It eliminates the requirement that personal casualty losses must exceed 10% of your adjusted gross income and allows taxpayers to claim a loss even if they don't itemize their deductions. A list of disaster relief areas by state and for guidance from the IRS can be found on their website, make sure you secure your data with a personal identification number.

IRS Online Accounts and Identity Protection

The IRS says it expects more people to sign up for online accounts this tax season. This allows you to view your payment status, get an identity protection pin, and respond to IRS messages. An IP pin prevents someone else from filing your tax return with your social security number and is especially recommended for anyone who has been the victim of fraud or or who has other reasons to protect their information, such as divorce.

Estimated Tax Penalties

More taxpayers are getting hit with penalties for underpayment, so be careful with that. This is often due to the side income that's earned, such as online sales that wasn't subject to withholding the number of taxpayers reporting the 7% quarterly penalty for failing to pay estimated taxes rose more than 15% to almost 14 million people in fiscal year 2023. According to the IRS, paying estimates on time or adjusting your withholding will eliminate the penalty.

Remember, the IRS likes to receive its tax revenue consistently over the course of the year, just like how we like to receive our paychecks. Of course, they will always accept a big check payment come April 15th, but again, that could trigger underpayment penalties this year.

Free Filing Options and IRS Direct File

There are more ways to file your taxes for free. The IRS is expanding direct file, a free online tax filing service for people with simple returns to 25 states this year. Up from 12 from last year service will now cover more tax situations than last year, including the premium tax credit for marketplace health insurance and deductions for health savings account contributions. The Treasury Department estimates that more than 30 million people are now eligible taxpayers with adjusted gross income of $84,000 or less also can file free using commercial software via the IRS free file. The IRS partners with eight different tax companies I bonds are no longer an option for your refund.

Refund Options Changes

This year, the treasury ended a program that allowed taxpayers to direct part or all of their refund into savings bonds. Still, you can use Form 88 88 to split your direct deposit refund between two or more accounts, including a savings account, a traditional or Roth IRA or education savings account.

Closing Summary

And there you have it. I hope this summary of tax changes helps you as you begin gathering all of your tax documents, we urge you to reach out to a tax professional to discuss your particular situation and goals. And don't forget, we always encourage you to take part in the financial planning process to pursue a confident financial future and in turn, feel optimistic and proud about your accomplishments. If you've diligently saved over the years and understand that the success of your retirement is too important to be managing yourself and you value professional and experience guidance, please feel free to give us a call here for complimentary initial consultation. Knowing that I've provided education and a plan for my clients has allowed me to turn a personal challenge into a gratifying journey. If there's a financial planning topic in the future that you would like to have us address, please let us know and we'll try to get it in on the next episode of Invest in Knowledge. So please reach out to let us know. Thank you so much for listening and make it a great day.