
BUSINESS/FINANCE
Gearing up for 2025 Tax Season

By TEJAL DHRUVE, CPA
Right now, you may be more focused on what you’ll owe (or receive as a refund) when you file your 2024 tax return in April than on tax planning for the new year. However, as you work through your annual tax filing, you should familiarize yourself with amounts that may have changed for 2025 due to inflation adjustments.
Here are four commonly asked questions (and answers) about 2025 tax figures:
1. How much money can I contribute to an IRA? If eligible, you can contribute up to $7,000 to a traditional or Roth IRA (but only up to 100% of your earned income, if less). If you’re age 50 or older, you can make another $1,000 “catch-up” contribution. (These amounts are the same as for 2024.)
2. What’s the maximum I can contribute to a 401(k) plan through my job? The amount you can contribute is up to $23,500 to a 401(k) or 403(b) plan (up from $23,000 in 2024). Those 50 or older can add a $7,500 catch-up contribution (unchanged from 2024). New in 2025, employees ages 60 through 63 can make enhanced catch-up contributions of up to $11,250 (including the $7,500 standard catch-up contribution).
3. How much must I earn not to pay Social Security on my entire salary? The Social Security tax wage base rises to $176,100 (from $168,600 for 2024). You don’t owe Social Security tax on amounts earned above this threshold. (Medicare tax must be paid on all amounts earned.)
4. How much can I give one person without requiring a gift tax return? The annual gift tax exclusion is $19,000 (up from $18,000 in 2024).
Married Filing Separately: When It May Make Sense
Filing joint tax returns generally results in the lowest tax bill for married couples. However, in some circumstances, they may pay less taxes if they file separately, such as when one spouse has large medical expenses. Medical expenses are deductible only to the extent that they exceed 7.5% of adjusted gross income (AGI). So if one spouse would have significantly lower AGI filing separately, it may increase the deduction.
But be mindful of the downsides of filing separately. Certain tax credits, for instance, are generally unavailable to separate filers, specifically for child and dependent care and education. Also, the capital loss deduction for separate filers is limited to $1,500 (as opposed to $3,000 for married couples filing jointly).
Yet there may be reasons filing separately is better even if the tax cost is higher, such as if one spouse has an income-sensitive repayment plan for student loans. Contact the office to weigh all the factors and determine the most advantageous strategy for your situation.
A Better Way to Help with Tuition
Another year is here, and that comes with a new school semester and tuition bills for many people. If you’re considering helping a grandchild or other loved one with their college expenses, first take time to review the tax implications. If the total amount you give to the student in 2025 exceeds the annual gift tax exclusion, you might owe gift tax on the excess. In 2025, this exclusion is $19,000 per recipient or $38,000 for married donors who split gifts (up from $18,000 and $36,000, respectively, in 2024).
Seema Ramroop, financial planner at Prudential Advisors, can be reached at (813) 957-8107 or email [email protected]