Tax Filing and New Changes for 2025

The IRS has announced that the 2025 tax filing season will commence on January 27, 2025.

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The standard deduction has increased to $15,000 for single filers and $30,000 for married couples filing jointly.

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Additionally, there have been minor adjustments to the tax brackets to account for inflation.

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Understanding how taxable income is calculated within these brackets is crucial. The U.S. tax system is progressive, meaning income is taxed at different rates as it moves through the brackets—a concept often referred to as the “stair-step” method.

Strategies to Reduce Tax Bills

Effective tax planning is a year-round endeavor. To minimize your tax liability, consider implementing strategies such as maximizing contributions to retirement accounts like 401(k)s and IRAs. Charitable planning, including the use of Donor Advised Funds, can also provide significant tax benefits.

Charitable Planning and Donor Advised Funds

“Bunching” charitable contributions is a strategy where you combine multiple years’ worth of donations into a single year to exceed the standard deduction threshold, allowing for itemization and greater tax benefits. Donor Advised Funds facilitate this approach by enabling you to make a large initial contribution, receive the tax deduction in that year, and distribute funds to charities over time.

Long-Term Tax Savings Strategies

Consider Roth conversions to transfer assets from tax-deferred accounts to tax-free Roth accounts, potentially reducing future tax liabilities. Asset location—strategically placing investments in taxable, tax-deferred, or tax-free accounts—can optimize tax efficiency. Additionally, tax-loss harvesting allows you to offset capital gains with losses, further reducing your tax burden.

Retirement Plan Options for Business Owners

If you’re a business owner, explore retirement plan options such as SEP IRAs, SIMPLE IRAs, 401(k)s, and Defined Benefit Plans. Each plan has distinct advantages and considerations, and selecting the right one depends on your business’s specific circumstances. Initiating retirement planning early in the year can maximize contributions and associated tax benefits.

Tax Planning for Real Estate Investors

Real estate investors should be aware of the limitations on deducting passive losses, which are often contingent on income levels. Attaining Real Estate Professional status can provide more favorable tax treatment. Strategies like cost segregation studies and 1031 exchanges can defer taxes and enhance the profitability of your real estate investments.

Tax Implications of Cryptocurrency Payments

Receiving payments in cryptocurrency is considered taxable income and must be reported accordingly. Additionally, spending cryptocurrency can trigger taxable events, as it’s treated as property by the IRS. It’s essential to maintain thorough records of all cryptocurrency transactions to ensure accurate reporting.

Conclusion

Staying informed and proactive is key to effective tax planning and retirement preparation. Remember, early and strategic planning can significantly reduce your tax liabilities and enhance your financial well-being.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Navigating the 2025 Tax Season appeared first on ROI TV.

Key Takeaways from Tax Strategies for Retirement

1. Understanding Marginal vs. Effective Tax Rates One of the foundational principles of tax planning is understanding the difference between marginal and effective tax rates. The marginal tax rate is the percentage you pay on your next dollar of income, while your effective tax rate is the average rate you pay on all your income. By understanding these rates, you can develop strategies to lower your taxable income and keep more of your hard-earned money.Tax diversification is crucial here. A balanced approach that includes tax-deferred, taxable, and tax-free accounts allows you to navigate different tax brackets efficiently. By contributing to different types of retirement accounts, you can create flexibility and control over how your income is taxed during retirement.
2. Retirement Contributions and Limits One of the best ways to reduce your current tax liabilities is by maximizing your retirement contributions. The Secure 2.0 Act has increased contribution limits for 401(k) plans, including additional catch-up contributions for those over 50. This allows you to contribute more to your retirement accounts and reduce your taxable income for the year.Joe and Big Al highlight the importance of employer matches in 401(k) plans, which essentially provide “free money” to boost your retirement savings. Additionally, contributing after-tax funds to retirement accounts can provide future tax-free growth, helping you build wealth efficiently.
3. Roth IRA and Roth 401(k) Contributions Roth accounts are one of the most powerful tools for tax-free growth in retirement. However, there are income limits for direct Roth IRA contributions, which can restrict higher earners from utilizing this strategy. Roth 401(k)s, on the other hand, have no income limits and provide similar benefits of tax-free withdrawals during retirement.Roth accounts offer the advantage of tax-free growth and tax-free withdrawals, which is especially beneficial for individuals who expect to be in a higher tax bracket during retirement. Converting after-tax contributions into Roth accounts is also a strategy worth considering to maximize tax-free growth and secure a tax-efficient retirement income stream.
4. Donor Advised Funds (DAFs) Charitable giving is not only a way to support causes you care about, but it can also provide significant tax benefits. Donor Advised Funds (DAFs) are a great option for individuals who want to bundle their charitable contributions to maximize tax deductions.With a DAF, you can donate appreciated stock or other assets and receive an immediate tax deduction, while still maintaining control over when and how the funds are distributed to charities. This strategy can be an effective way to reduce your taxable income while supporting causes that matter to you.
5. Qualified Charitable Distributions (QCDs) For retirees who are required to take Required Minimum Distributions (RMDs) from their retirement accounts, Qualified Charitable Distributions (QCDs) offer a tax-efficient way to donate those funds directly to charity. By doing so, you avoid paying taxes on the RMD amount, effectively lowering your taxable income for the year.QCDs can be an effective strategy for those who want to continue giving to charity while minimizing the tax impact of their RMDs. Using QCDs strategically can help reduce your tax bill in retirement, while still fulfilling your philanthropic goals.
6. Section 179 Deduction for Business Equipment For business owners, tax planning doesn’t stop at retirement accounts. The Section 179 deduction allows you to write off the cost of business equipment in the year it was purchased, rather than depreciating the cost over several years.This deduction can provide immediate tax relief, especially if your business is making significant equipment purchases. Joe and Big Al explain the pros and cons of taking the Section 179 deduction versus spreading out the depreciation over time, so you can make the best decision for your business and your tax planning strategy.

Next Steps to Maximize Your Tax Benefits

1. Update Your Tax Guide
   As tax laws evolve, it’s important to stay up-to-date with the latest strategies and regulations. Consider reviewing your tax guide to ensure you’re taking advantage of all the deductions and credits available to you.
2. Maximize Charitable Contributions with a Donor Advised Fund
   If charitable giving is part of your financial plan, explore the option of using a Donor Advised Fund (DAF) to bundle donations and increase your tax deductions.
3. Consider Qualified Charitable Distributions for Your RMDs
   If you’re taking RMDs from your retirement accounts, consider using Qualified Charitable Distributions to donate those funds to charity and avoid the associated taxes.
4. Strategically Purchase Business Equipment
   If you own a business, evaluate the impact of Section 179 deductions on your equipment purchases. Take advantage of this deduction to maximize tax savings while investing in the growth of your business.

Conclusion: Take Control of Your Taxes and Retirement

Effective tax planning is essential for building wealth and ensuring a secure financial future. By utilizing strategies like Roth IRA contributions, Donor Advised Funds, and Qualified Charitable Distributions, you can minimize your tax liabilities and create a more tax-efficient retirement plan. Whether you’re an individual planning for retirement or a business owner looking to optimize your tax savings, the strategies discussed in this episode can help you take control of your finances and make smarter decisions for your future.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. • Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors

The post Tax Tips and Strategies for Retirement from Joe Anderson and Alan Clopine appeared first on ROI TV.