What Financial Professionals Need for 2025 Tax Planning

From the potential for more paperwork in third-party payments to shifts in how state and local tax deductions are calculated, tax impacts on financial planning in 2025 may have wide-reaching implications for your clients. Here are a few of the most significant changes to consider.

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Have Clients Check Their Tax Bracket

Due to inflation adjustments, tax planning in 2025 could get a bit easier for some clients as tax brackets widen. Basically, for those clients who were at either end of their current tax bracket in 2024, it’s possible their status may have shifted into a lower bracket — which would also lower their 2025 taxes. Which bracket your clients fall into could dramatically shift their taxable income, as well as other considerations such as retirement planning.

Third-Party Payments Could Get More Complicated

If your clients frequently use payment apps, money transfer services, or third-party websites like PayPal, Venmo, and eBay to get paid, chances are they could be dealing with more tax planning paperwork in 2025. Revisions to Internal Revenue Service (IRS)1099-K forms and reporting thresholds mean that all proceeds above $600 must be reported in official documentation — a significant lowering of the bar from the old $5,000 threshold.

While it’s the law to report all income in taxes, many of your clients may underreport such payments due to the previously high threshold — and that means they’ll likely be seeing more 1099 forms in the mail. Clients may need additional guidance on how to navigate the tax planning process if they commonly use third-party services as a source of income.

Consider Sheltering Some Income

The 2017 Tax Cuts and Jobs Act (TCJA) significantly reshaped the tax-planning landscape, relieving the tax burden on many clients; however, with those changes set to expire at the end of 2025 without further legislative action, now may be a good time to discuss some opportunities for protecting clients’ income in non-taxable accounts. If your clients are looking to save more as part of their retirement planning without worrying about tax, speaking with them about the benefits of tax-deferred, employer-sponsored retirement plans, such as 401(k) plans, or traditional and Roth IRAs may be advisable. If they’re looking to put non-taxable dollars toward a child’s future education, a 529 college savings account could also be helpful.

In addition, gifts to family members or charitable giving toward a favored nonprofit or cause can protect income during tax planning — so 2025 may be an ideal time for your clients to consider making such a gift.

"There's a few last-minute tax impacts that you can implement today,” said Sophia Duffy, JD, CPA, AEP®, associate professor of business planning and Tax Planning Certified Professional™ (TPCP™) program director in a recent interview with Yahoo Finance. “For example, increasing charitable deductions so that you go over the standard deduction may make sense. You could also take advantage of a strategy called tax loss harvesting. This may be a little bit more difficult, but for anywhere where you’ve seen market losses, you can actually realize that loss today and then use that to offset some capital gains with other investments tomorrow."

Keep an Eye on the Child Tax Credit

For clients with children, they may be interested to know the 2025 Child Tax Credit ceiling is more generous than ever. Under 2025 tax planning guidelines, the maximum refundable amount per child on tax returns will increase from $1,900 to $2,000. The impending expiration of the TCJA at the end of the year, however, could trigger a significant change in those refunds in 2026 — making it something you and your clients may want to watch.

Be Mindful of State and Local Tax Deductions

For your clients who may itemize their tax deductions to reduce taxable income, it will also be important to monitor developments in the state and local tax (SALT) deduction. With the advent of the TCJA, a $10,000 cap was placed on such deductions in tax planning, which can lead to a greatly reduced tax bill. With the TCJA’s future uncertain, that cap could well be rolled back in 2026, presenting an entirely new landscape of tax impacts on financial planning. For such tax planning purposes, you can help your clients by helping them take a long view of tax-informed planning — such as that found in the Tax Planning Certified Professional™ (TPCP™) Program.

Looking for more resources for your 2025 tax planning needs? Download our 2025 Tax Planning Guide.

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