They say that knowledge is power, and that’s especially true in the world of finance, where knowing the correct philosophies, strategies, and tactics can help you build significant wealth.
But the world of stocks, investments, and especially taxes is ever-changing, with a host of updated guidelines and rules just about every year.
For that reason, I wanted to highlight a few of the key changes and updates for 2025.
If this all looks confusing or even a little overwhelming, don’t worry; that’s exactly why I’m here – to guide you through it all.
As always, make sure to consult with your CPA or tax preparer or reference the IRS website directly to ensure accuracy and what applies to your specific situation.
Here are some key changes you need to be aware of for 2025:
Optimizing Retirement Savings
The IRS has unveiled its 2025 Contribution and Benefit Limits:
– 401(k) Contributions: The limit has increased by $500, allowing participants to contribute up to $23,500.
– Catch-Up Contributions:
– For individuals aged 50-59 and 64+, the total allowable contributions remain at $31,000, including the unchanged $7,500 catch-up limit.
– “Super” Catch-Up Contributions:
– New for 2025! Those aged 60-63 can contribute a combined $34,750, which includes an $11,250 “super catch-up.” Introduced under the SECURE 2.0 Act, this provision is designed to enhance retirement savings during critical years.
Qualified Charitable Distributions (QCD)
Introduced by the Pension Protection Act of 2006, the Qualified Charitable Distribution (QCD) enables charitable donations directly from an Individual Retirement Account (IRA).
– 2024 QCD Limit: $105,000 per person.
– 2025 QCD Limit: Increases to $108,000.
QCDs offset Required Minimum Distributions (RMDs), reducing taxable income. This is particularly advantageous for high-net-worth individuals whose RMDs exceed their financial needs or for those unable to itemize deductions. Donating through QCDs allows individuals to claim the standard deduction while enjoying the full benefit of charitable contributions. If you’re in the RMD phase and make charitable donations, this strategy can be highly effective.
Strategic Gifting to Family
– Estate Tax Exemption: $13,610,000 per person for 2024, rising to $13,990,000 in 2025.
– Assets exceeding this exemption are subject to a federal estate tax of 40% (simplified).
– Upcoming Changes: The current high exemption amounts are set to expire in January 2026, reducing to an estimated $7,000,000 per person, depending on inflation.
Key updates to RMDs, IRA contributions, and 529 Plans
The SECURE Act, passed in 2019, introduced significant updates to retirement planning, further expanded by SECURE 2.0 in 2022. Notable provisions include:
– RMD Age Adjustment:
– The starting age for RMDs has shifted to 73 for those turning 72 after December 31, 2022.
– By 2033, the RMD age will increase again to 75, providing more time for tax-deferred growth.
– IRA Contributions at Any Age: Contributions to Traditional IRAs are now allowed beyond age 70½, provided there is earned income.
– 529 to Roth IRA Transfers: Starting in 2024, funds in a 529 College Savings Plan can be moved to a Roth IRA under specific conditions.
Health Savings Accounts (HAS)
HSAs are an exceptional savings tool, offering triple tax advantages: tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses.
– 2025 Contribution Limits:
– Individual HSA: $4,300 (up from $4,150 in 2024).
– Family HSA: $8,550 (up from $8,300 in 2024).
To contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP), which in 2025 is defined as:
– Minimum Deductibles: $1,650 for individuals, $3,300 for families.
– Maximum Out-of-Pocket Expenses: $8,300 for individuals, $16,600 for families.
Eligibility excludes those enrolled in Medicare, covered by a non-HDHP, or claimed as dependents on another tax return.
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So, contact us for a review of your financial situation and make sure your goals and strategies are in-line with these important new updates!
-James DesRocher
Source:
https://www.boyd-wealth.com/blog/11-planning-ideas-for-year-end-2024
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 800 Westchester Avenue, Suite N-409 Rye Brook, NY 10573, (914) 288-8800. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is a wholly-owned subsidiary of Guardian. TrueView Financial LLC is not an affiliate or subsidiary of PAS or Guardian. TrueView Financial LLC in not a registered investment advisor. CA Insurance License #0M83430
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