Tax saving strategies for 2025

[UNITED STATES] As tax season 2025 approaches, many taxpayers may be wondering how the latest changes to tax laws will affect their refunds or liabilities. Whether you're filing as an individual, a family, or a business, understanding the tax updates for 2025 could lead to significant savings. This article explores the key tax changes and strategies that could help you save money during tax season 2025.

1. Updated Tax Brackets and Adjustments for Inflation

One of the most anticipated changes for 2025 is the annual adjustment of tax brackets. The IRS adjusts the brackets for inflation each year, and 2025 will see incremental increases in income limits for various tax rates. These adjustments are designed to prevent “bracket creep,” where inflation pushes taxpayers into higher tax brackets despite no real increase in income.

For example, if you're currently in the 24% tax bracket, a slight increase in your income might have pushed you into the 32% tax bracket without the adjustment. With the IRS’s 2025 changes, individuals will have a higher income threshold before being taxed at the next level. This means more of your income will be taxed at lower rates, which could result in significant savings.

Tip: Keep an eye on your income and tax bracket adjustments to ensure you're making the most of these changes.

2. Increased Standard Deduction

The standard deduction is set to increase again in 2025. This deduction reduces the amount of your taxable income, ultimately lowering your tax bill. For individual taxpayers, the standard deduction in 2025 will be higher, making it easier to reduce taxable income without having to itemize deductions.

For 2025, the standard deduction is projected to rise to approximately $13,850 for single filers and $27,700 for married couples filing jointly. This is a significant increase from previous years and will benefit many taxpayers who would otherwise not benefit from itemizing their deductions.

How This Saves You Money: If you don’t have enough deductible expenses to itemize, the increased standard deduction will lower your taxable income, reducing your overall tax liability.

3. Child Tax Credit and Dependent Benefits Expansion

The Child Tax Credit (CTC) has undergone various modifications in recent years, and 2025 will bring a continuation of these changes. For many parents, this credit is a vital way to reduce tax liability. In 2025, the CTC will remain at a maximum of $2,000 per qualifying child under the age of 17.

Additionally, families with children under six may be eligible for an increased refund of up to $1,400 per child due to the refundable portion of the credit. As a result, families may see a larger refund or a lower tax bill when they file.

Tip: Make sure to track your child’s age and qualifying status to ensure you’re receiving the maximum CTC available to you.

4. Expansion of Earned Income Tax Credit (EITC)

For low to moderate-income earners, the Earned Income Tax Credit (EITC) can provide a substantial refund. The EITC will see some adjustments in 2025 to help support those who work but earn a lower income. For instance, the income limits for eligibility are increasing, and more individuals and families will be able to claim the credit.

In 2025, single filers with no children can qualify for the EITC if their income is below $18,000, while a family of three or more can qualify with an income up to $56,000. Additionally, the credit amount itself may increase slightly, depending on income levels.

How This Saves You Money: If you're eligible for the EITC, it can lead to a larger refund, or even reduce the amount you owe the IRS. This is especially important for lower-income workers who rely on this benefit.

5. Retirement Account Changes: Increased Contribution Limits

For those planning for retirement, 2025 brings several exciting updates. The IRS will increase the contribution limits for retirement accounts such as 401(k)s, IRAs, and Roth IRAs. For example, the contribution limit for a 401(k) is expected to increase to $22,500 for individuals under 50, with an additional $7,500 catch-up contribution allowed for those 50 and older.

For IRAs, the contribution limit will rise to $7,500 for individuals under 50, with a $1,000 catch-up contribution for those over 50.

Tip: Take advantage of these increased contribution limits to reduce your taxable income. By maxing out your retirement contributions, you can lower your current-year tax bill and invest in your future.

6. Health Savings Account (HSA) Limits on the Rise

Health Savings Accounts (HSAs) are another great way to save on taxes in 2025. These accounts allow you to contribute pre-tax money toward medical expenses, and the funds grow tax-free. In 2025, the contribution limits for HSAs will increase.

The new contribution limit for individuals with self-only coverage is expected to be $4,950, while family coverage will increase to $9,900. These higher limits allow you to set aside more money for health-related expenses while reducing your taxable income.

How This Saves You Money: By contributing more to an HSA, you can take advantage of tax-free growth and savings for healthcare needs, reducing your overall tax burden.

7. Capital Gains Tax Changes

For investors, changes to capital gains tax rates could have a significant impact on 2025 returns. Although the long-term capital gains tax rate will remain at 0%, 15%, or 20% depending on your income, there is a potential for changes in how capital gains are taxed, especially for higher-income earners. In some cases, you may find opportunities to minimize taxes on capital gains through tax-loss harvesting, a strategy where you sell losing investments to offset gains.

How This Saves You Money: By being strategic with your investments and knowing when to sell, you can potentially lower your capital gains tax liability and keep more of your earnings.

8. State and Local Tax Changes

In addition to federal tax changes, it's essential to be aware of state and local tax changes that could impact your 2025 filing. Some states have lowered their income tax rates, while others have implemented new tax credits or incentives for homeowners, renters, or those contributing to local charities.

How This Saves You Money: State and local tax changes can add up, so be sure to review your state’s tax laws and take advantage of any new deductions or credits available to you.

9. Tax Filing Deadlines and E-Filing Updates

For 2025, the IRS has confirmed that tax filing deadlines will remain unchanged. However, the IRS continues to encourage taxpayers to e-file as it is faster, more secure, and often results in quicker refunds. Filing online also offers the ability to track your return status and avoid common errors.

Tip: Make sure to file early and take advantage of e-filing for faster processing of your return. Additionally, stay updated on any possible changes in filing deadlines.

10. Planning for Tax Season 2025: Strategic Tips

As tax season 2025 approaches, it’s important to begin planning ahead to maximize your savings. Here are a few strategies to consider:

Review Your Withholding: Adjust your tax withholding if necessary to ensure that you’re not overpaying or underpaying throughout the year.

Track Medical and Educational Expenses: If you’re eligible for deductions, keep track of medical expenses, tuition, and other eligible expenditures to maximize your itemized deductions.

Consult a Tax Professional: If you're unsure how these changes will affect your tax return, it’s worth consulting a tax professional to ensure you're taking full advantage of tax-saving opportunities.

Tax season 2025 brings several updates and changes that could help you reduce your tax bill or increase your refund. From adjustments to tax brackets and increased deductions to expanded credits and retirement account contribution limits, there are plenty of opportunities for taxpayers to save money. By understanding the changes and planning ahead, you can make the most of these tax-saving strategies in 2025.