Category: Tax Returns

Tax filing and tax returns are a perfect time to reexamine your tax situation and decide if some changes are in order.

Tax Changes Coming in 2025

Tax Changes Coming in 2025

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If there’s one thing that’s as inevitable as death and taxes, it’s changes to the tax code and 2025 is no different. Luckily, not all of these changes are bad. Let’s take a look at some of the changes coming in 2025 that could affect your bottom line.

Change #1: Revised Tax Brackets

The 2025 tax year will see new tax brackets that apply to income tax returns. This isn’t a massive change or an unexpected one, as the IRS usually changes these each year to adjust for inflation. These are a good thing, as they help prevent taxpayers from getting pushed into higher tax brackets (and pay higher taxes) when they get an annual raise or cost of living adjustment to their income. The new tax brackets are as follows:

  • 10%: For incomes up to $11,925 (Up to $23,850 for married couples filing jointly)
  • 12%: For incomes more than $11,925 ($23,850 for married couples filing jointly)
  • 22%: For incomes more than $48,475 ($96,950 for married couples filing jointly)
  • 24%: For incomes more than $103,350 ($206,700 for married couples filing jointly)
  • 32%: For incomes more than $197,300 ($394,600 for married couples filing jointly)
  • 35%: For incomes more than $250,525 ($501,050 for married couples filing jointly)
  • 37%: For incomes more than $626,350 ($751,600 for married couples filing jointly)

Change #2: Standard Deductions

You can sometimes save more money on your taxes if you itemize your deductions, but many taxpayers appreciate the convenience of standard deductions. The following list shows how much the new standards deductions will be:

  • Single filers: $15,000 (a $400 increase)
  • Married couples filing jointly: $30,000 (an $800 increase)
  • Head of household filers: $22,500 (a $600 increase)

Change #3: Earned Income Tax Credit

For the 2025 tax year, the maximum Earned Income Tax Credit limit goes up to $8,046 (this maximum was $7,830 for the 2024 tax year). This is the maximum Earned Income Tax Credit a qualifying taxpayer can expect if they have three or more qualifying children. As you might expect, these limits go down if there are fewer qualifying children:

  • Two qualifying children: The new maximum is $7,152 (up from $6,960 in 2024)
  • One qualified child: The new maximum is $4,328 (up from 4,213 in 2024)
  • No qualifying children: The new maximum is $649 (up from $632 in 2024)

Change #4: Estate Tax Credit

The 2025 tax year has a bigger basic exclusion amount of $13,990,000. In 2024 it was $13,610,000.

Change #5: Alternative Minimum Tax Exemption

In 2024, the exemption amount for unmarried individuals was $85,700 ($133,300 for married couples filing jointly). In 2025, these amounts rise to $88,100 for unmarried individual filers and $137,000 for married couples filing jointly. The phase-out threshold is also increasing, with a new amount of $626,350, up from $609,350 in 2024.

Change #6: Adoption Tax Credit

An adoption of a child now has a maximum credit of $17,280, which is up from the $16,810 maximum limit for the 2024 tax year.

Change #7: Transportation Fringe Benefit

The monthly qualified transportation fringe benefit rises to $325, a $10 increase from 2024.

Change #8: Foreign Income Exclusion

In 2025, this exclusion is rising by $3,500 to $130,000.

More Uncertainty Coming in 2025

One of the biggest changes in 2025 is the fact that many key parts of the Tax Cuts and Jobs Act of 2017 will expire. Unless they’re renewed by Congress, key tax benefits that many taxpayers enjoy will be reduced, such as the standard deduction, lower marginal tax rates, and the child tax credit. Given the uncertain political climate and the fact that 2024 is a presidential election year means it’s difficult to plan for these changes. However, consulting with a tax professional can help, especially when planning for worst-case scenarios. bject to Form 8938’s reporting and filing requirements, you should consult with a tax professional.

Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!

Do Not Ignore Your Tax Problems!

Tax Law is Our Specialty. Contact us to Get Your Life Back to Normal.

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Tax Deductions You May Not Know About

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If you have any experience with filing income tax returns, you probably have a general idea of what tax deductions are. Off the top of your head, you may know some of the more common deductions, such as the standard deduction, the charitable contribution deduction, and the mortgage interest deduction. But there are many others you could be eligible for, but don’t know about or fully understand. Let’s take a look at some of them in this month’s blog post.

Student Loan Interest Deduction

If you’re paying interest on your student loans, you can use some (or all) of the money spent on interest to lower your taxable income. For federal tax purposes, the money you spend on interest for your student loan payments is deductible, but only up to $2,500.

One of the nice things about this deduction is that it’s not an itemized deduction. However, you’ll only receive the full $2,500 deduction if your modified adjusted gross income is less than $70,000 ($145,000 if filing jointly). However, as long as your income is less than $85,000 ($175,000 if filing jointly), you may still be able to take this deduction, just not the full $2,500.

Medical Expense Deduction

One of the reasons you may not know about this deduction is that you probably won’t qualify for it unless you end up with some hefty medical bills. Generally speaking, you can only take this deduction for a tax year if you have unreimbursed medical (including dental) expenses that exceed 7.5% of your adjusted gross income for that tax year. These expenses can be deductible for not just your medical expenses, but also those of your spouse or dependent.

Deduction for Gambling Losses

Losing money at the casino or on a sports game is never fun, but there’s some consolation in the fact that some of your losses may be tax deductible. But before you start placing your bets, you need to understand that the deduction only applies to the extent of your winnings. In other words, the amount of your gambling deduction cannot exceed your gambling winnings.

For example, if you placed five $100 bets during March Madness and lost on all five of those bets, you don’t get to take a $500 tax deduction for your gambling losses. However, if you won two of those bets and lost three of them, then you could take a $200 gambling loss deduction (and not a $300 deduction). Another thing to consider is that you can only take this deduction if you itemize your deductions.

Another important consideration about this deduction is the need to detailed and complete records. You’ll want to document each bet, including how much you spent (including any fees), your wins/losses, as well as the source of the money used for the bets.

Deduction for Retirement Contributions

If you’re diverting some of your paycheck into an eligible 401(k) or traditional IRA retirement account, then some (or all) of what you’re saving could be tax deductible. With a traditional IRA, you’re limited to making contributions that don’t exceed the lesser of your total income for that year or $7,000 (if you’re under 50) and $8,000 (if you’re 50 and older).

With a 401(k), your deduction is not a deduction in the traditional sense. Rather, those contributions to your 401(k) get taken out of your paycheck before you even see the money. So you’re not claiming the contributions as a deduction later on in March or April when you prepare and file your taxes for the prior tax year. This is not only easier on you when you file your taxes, but you get the tax benefit immediately as the 401(k) contribution lowers your income subject to income tax withholding by your employer.

Health Savings Account Contributions

If you make contributions into a qualified health savings account, or HSA, the contributions you make directly into your HSA may be tax deductible.

Deduction for Expenses Incurred as a Self-Employed Worker

Contractors and freelancers can deduct certain expenses they incur as a result of their work. Some of these include money spent on home office expenses, health insurance premiums, continuing education costs, vehicle mileage, self-employment taxes, and office supplies.

Education Expense Deduction

Eligible teachers and educators can deduct up to $300 spent on classroom and teaching supplies.

Bottom Line

Tax deductions offer a great way to lower your tax bill, but they often have special conditions or limitations. You may also need to itemize your taxes to take advantage of them. To learn more about how these deductions work and whether it may be worth taking them, speak with your tax professional. If you take one or more deductions when you’re not supposed to, you could find yourself in trouble with the IRS.

Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!

Do Not Ignore Your Tax Problems!

Tax Law is Our Specialty. Contact us to Get Your Life Back to Normal.

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tax lien and tax levy

What’s the Difference Between a Tax Lien and a Tax Levy?

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If a taxpayer has unpaid taxes and doesn’t make arrangements with the IRS to pay that tax balance off over time, then the IRS will initiate the tax collection process. It will begin with letters and notices, asking the taxpayer to pay their tax bill. But, pretty soon, the IRS will send a written warning to the taxpayer that a lien or levy is imminent.

If the IRS files a tax lien against you or levies your property, what does that mean exactly, and should you care which method the IRS uses?

What is an IRS Tax Lien?

When the IRS files a Notice of Federal Tax Lien against you, the IRS is telling the general public that you owe back taxes. This makes it practically impossible to sell or transfer your property unless you first remove the tax lien. This is because no one wants to buy property from you, knowing the IRS may have the legal right to step in and take it from them to pay off your tax debt.

When it comes to your credit history, the tax lien no longer has the negative effect it used to have. Now, IRS tax liens do not show up on your credit report or have an impact on your credit score. That being said, a tax lien can still hurt your credit in that it makes it more difficult (and/or more expensive) to get a loan.

If you’re trying to buy a new car or house by borrowing money, it will be extremely difficult to do so with a tax lien. Not only does a tax lien signal you’re struggling financially, but it also means the creditor likely can’t get a security interest in your property to secure the loan.

For instance, if you wanted a car loan, your lender would probably expect your car to serve as collateral for the loan in case you default. But if there’s a tax lien in place, the car will automatically have a tax lien on it after you buy it (IRS tax liens apply to current and future properties).

This means the car loan lender may not be able to repossess the car from you in case you default on the car loan. The practical consequence is that you either get denied the car loan, or you get it but with a larger down payment and/or a higher interest rate.

What is an IRS Tax Levy?

IRS tax levies can pose a bigger problem than a tax lien. Unlike a tax lien, which is basically a legal warning to others that your property could be used to pay a tax debt, a tax levy is the actual taking of property to satisfy a tax debt. For example, the IRS might levy your bank account and withdraw money from it without your consent, or they might levy your paycheck in the form of a wage garnishment.

Can the IRS File a Lien or Place a Levy on My Car or Home?

Yes, for liens, and almost never for levies. When the IRS files a lien against you, it attaches to not just a specific piece of property, but almost anything you own, including your home and your primary vehicle.

And although the IRS can, theoretically, levy your home or car, it’s very rare for the IRS to do so. There are several reasons for this. First, it’s not worth the trouble, as using a bank levy or paycheck levy (wage garnishment) is almost always a more effective and efficient way to collect back taxes.

Second, the IRS understands that taking away your car or home could hurt your ability to earn income, and they know you need income if you are to pay off a tax debt.

Third, taking your car or home is a bad look for the IRS. The IRS already has a less-than-positive reputation with most people (and members of Congress). A viral story about how they made you go homeless or got you fired because you could no longer get to work is just asking for unnecessary scrutiny and political pressure.

Bottom Line

The IRS trying to collect taxes from you is bad news, regardless of whether the IRS decides to use a lien or levy. However, when it comes to your financial health and daily living, a levy is more likely to cause problems for you in the short term.

Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!

Do Not Ignore Your Tax Problems!

Tax Law is Our Specialty. Contact us to Get Your Life Back to Normal.

Get a FREE Case Evaluation
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Is a Tax Credit Better Than a Tax Deduction?

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Whether you’re tax planning or preparing your income tax return, you’ve probably heard about tax credits and deductions. You also probably know that they’re both good to have when it comes to owing less money to the IRS. Let’s take a closer look at both of these tax benefits, including which one is better, how they work, and how they’re different from each other.

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tax scams to watch out for and avoid

Tax Scams to Watch Out for and Avoid

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The desire to steal other people’s money has probably been around since the invention of money. The only thing that’s changed over time has been the lies criminals tell to get that money. Because of the emotional reaction people often have to the IRS, many scammers focus on taxes as a means of tricking their potential victims. Let’s take a look at some of the newer and more common schemes you and other taxpayers are likely to see this tax season.

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Income Tax Deductions: Itemized Versus Standard

Income Tax Deductions: Itemized Versus Standard

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Tax season is well underway. If you haven’t already filed your income tax return for the 2023 tax year, you’re either getting ready to start the process or already in the swing of things. One of the questions you might need to address is whether to take the standard deduction or itemize your tax deductions.

The answer to that question is really easy, at least in theory. You take the deduction that offers you more tax savings. But how do you know which one offers more tax savings? That’s a tougher question and its answer depends on your unique situation. However, if you’re like most taxpayers, you’ll be better off taking the standard deduction. But why is that? We’ll answer that question in this blog post, but before we do, let’s take a quick look at tax deductions.

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an overview of the gift tax

An Overview of the Gift Tax

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There’s a cynical saying that goes something like this: “No good deed goes unpunished.” If you’re not familiar with it, it means that people who act kindly will often get punished for their acts of kindness. Whether this is true may be up for debate. What’s not up to debate is that subject to certain conditions, the IRS will gladly tax anyone for the gifts they give.

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