2025 Personal Tax Planning Guide

What’s New

With more than $4 trillion of tax increases scheduled to take effect at the end of 2025, the coming year could be the most consequential year for tax legislation since the 2017 enactment of the Tax Cuts and Jobs Act (TCJA). No matter the outcome of November’s elections, next year’s Congress and administration will be required to confront these looming tax increases.

The challenge facing policymakers in 2025 is a daunting one and the massive price tag associated with extending 2017’s tax cuts could force Congress to seek new tax increases to offset these costs. It is hoped that this report gives the reader an opportunity to examine some of the tax items impacting individuals and closely held businesses that may be part of a larger examination of the tax code and to analyze the potential impact to themselves.

This report outlines the many provisions that are set to expire that will have a particular impact on individuals and closely held businesses. To highlight a few, the following changes are currently scheduled to take effect on January 1, 2026:

• Individual marginal tax rates will return to the pre-TCJA rate structure – replacing today’s top marginal rate of 37% with a 39.6% top rate
• The TCJA’s temporary increase in the lifetime gift and estate tax exemption (as well as the GST exemption) will expire – decreasing the exemption from $10 million to $5 million (as adjusted for inflation)
• The 20% deduction for an individual’s domestic qualified business income from a partnership, S corporation or sole proprietorship will expire
• The current $10,000 limitation on the deductibility of state and local taxes will expire
• Modifications to the Alternative Minimum Tax are likely to expand the tax to more taxpayers
• The ability to deduct the interest on mortgage acquisition debt will increase from the current generally applicable cap of $750,000 to $1 million
• The AGI limitation for certain charitable contributions will decrease from 60% to 50%
• Rules governing the standard deduction, individual exemptions and the overall limitation on itemized deductions will revert to pre-TCJA rules

As a result, 2025 appears on track to become a year of potential volatility in tax planning. It is important for taxpayers to monitor the evolving situation in Washington, as there is a possibility of significant changes in the tax code throughout the year. While changes in tax laws are often drafted to take effect at future dates, there is always a possibility of changes that could become effective immediately upon enactment (or even retroactively to the beginning of the year or date of introduction). For taxpayers, change can hold the possibility of opportunity as well as challenge.