Preparing for Tax Season: Essential Tips for 2025
As tax season approaches, many taxpayers find themselves embarking on the arduous task of organizing records for their tax appointment—whether conducted in person, via videoconference, or over the phone. The ease of this process largely depends on how diligently you've maintained your tax records throughout the year. Regardless of your record-keeping prowess, being thoroughly prepared for your tax return preparation will allow us to maximize your tax efficiency by dedicating more time to:
Identifying all possible legal deductions,
Determining the most beneficial income reporting methods and deductions for your unique circumstances,
Understanding the latest legislative changes impacting your tax liabilities, and
Exploring tax-planning strategies to minimize future tax burdens.
What's New for 2025?—This year sees several changes, largely due to the One Big Beautiful Bill Act (OBBBA), including notable updates such as:
No Tax on Tips: You can now deduct up to $25,000 for qualified cash tips in customary tip-receiving professions. This deduction phases out for AGIs exceeding $150,000 for singles and $300,000 for joint filers. Employers will include qualifying tips on the employee’s W-2 or provide a separate statement for 2025 only.
No Tax on Qualified Overtime: Deductible amounts up to $12,500 ($25,000 for joint filers) on overtime exceeding a regular rate. This deduction phases out for a MAGI of $150,000 (singles) and $300,000 (joint filers). Example:
Overtime Hourly Rate: $30.00
Regular Hourly Rate: 20.00
Deductible Amount: $10.00 per overtime hour workedVehicle Loan Interest Deduction: Deduct up to $10,000 for loans on new personal-use vehicles assembled in the U.S. after 2024. Phases out for incomes between $100,000-$150,000 for singles and $200,000-$250,000 for joint filers. A new Form 1098-VLI or an equivalent statement will be issued in 2025.
SALT Deduction Limit: The SALT deduction cap increases to $40,000, with a phase-down for higher-income taxpayers starting at $500,000 MAGI.
Super Retirement Catch-Up: Enhanced catch-up contributions are available for those aged 60-63, increasing to $11,250 (or $5,250 for SIMPLE plans).
Child Tax Credit: The credit now amounts to $2,200 ($1,700 refundable) for dependents under 17, subject to MAGI phase-outs and requiring a work-eligible SSN.
Adoption Credit: Now partially refundable at $17,280, with $5,000 refundable, subject to phase-outs.
Section 179 Expensing: Limit raised to $2.5 million, benefiting small to medium-sized businesses with dollar-for-dollar phaseouts over $4 million.
Bonus Depreciation: Permanently allows a 100% write-off for eligible assets, applying post-January 19, 2025.
Business Research Expenses: Domestic expenditures are fully deductible starting in 2025, whereas those outside the U.S. must continue to amortize over 15 years.
Selecting Optimal Strategies—Tax laws allow multiple methods for handling income and deductions. Choices made on your return may affect both current and future filings. Considerations include:
Sales of Property: You may opt to report gains either entirely in the year of sale or incrementally.
Depreciation: Assets can be depreciated over time or expensed in full under certain conditions.
Getting Started—Begin organizing for your tax returns as soon as January hits. Securely store all relevant documents as they arrive to simplify your tax preparation. Printable electronic documents may need to accompany your submissions unless instructed otherwise.
Sort tax records by category. Use separate envelopes for medical expenses, mortgage interest, charitable contributions, and so on. Complete any organizer thoroughly that you receive and call out any cross-border financial interests to ensure compliance. Severe penalties may result from oversight.
Cryptocurrency remains a hot spot for IRS focus. Use Form 1099-DA for cryptocurrency dealings.
Provide forms issued by health insurance marketplaces (Form 1095-A) or employers (Form 1095-B/C).
Keep income statements alongside other documents (W-2s, 1099s, K-1s). They are essential for your tax appointment or submission responses.
Document all your questions during material compilation to avoid missing key inquiries during your appointment or when submitting materials.
Review past returns, contrast income year-on-year, and ensure Social Security numbers for all dependents are accurate. Deductions can be missed without careful comparison.
Maintain records of any unusual financial activity that could influence your tax situation and consult us as needed for guidance.
Accuracy Matters—Ensure personal data accuracy on your return by verifying names, addresses, and Social Security numbers. These elements are vital for smooth tax preparation.
Changes in Marital Status—Bring documentation of marital changes, agreements, or spousal loss to your appointment as these can significantly affect tax calculations and eligibility.
Dependent Requirements—Provide necessary details for each dependent. For non-children, detailed tests must be passed to qualify for dependency claims. This helps ensure compliance and optimize potential tax benefits.
Special Transactions—Prepare additional documentation for specific cases such as property sales, inheritances, reinvested dividends, and home purchases to correctly report these events. These transactions often have unique reporting requirements.
Sales of Stock: Every sale transaction needs recording, profit or loss, along with respective cost and sale details.
Gift or Inherited Property: Essential to know the original owner's acquisition cost and date of death for basis calculations in dispositions.
Reinvested Dividends: Maintain records of all reinvestments to correctly declare cost basis when disposing of shares.
Home Transactions: Bring final escrow documents of any home sales or purchases to benefit from applicable exclusions.
Eligible Energy Modifications: Document energy-efficient modifications to claim potential credits.
Identity Theft Concerns: Contact us immediately if identity theft issues arise for guidance on protected filing procedures.
Business Vehicle Expenses: Details of vehicle mileage and expenses must be meticulously recorded for deduction purposes.
Charitable Contributions: Obtain credible receipts for donations and maintain thorough itemization. Unreceipted cash donations are non-deductible.
Reach out early and clarify any unique circumstances that may affect filing requirements. For questions on organizing tax documents, please reach out to our office.
Sign up for our newsletter.
Each month, we will send you a roundup of our latest blog content covering the tax and accounting tips & insights you need to know.
We care about the protection of your data.