George Kamel - The Biggest Tax Changes In 2025

Starting point is 00:00:05 Time is ticking, friends. The deadline to file your taxes is approaching faster than your cacky-rocking coworkers when someone says there's cake in the conference room. Meanwhile, the IRS has already announced some major tax changes for the 2025 tax season, which will affect your tax return next year in 2026. And believe it or not, these tweaks might actually help you out. So in today's video, we'll talk about the biggest tax changes for 2025 and how they might help you keep more of your hard-earned cash. But first, click those like and subscribe buttons and share this with all of your coworkers who are currently, digging through drawers in the office kitchen looking for plastic forks. Draw on the right. You're welcome. Wow. Thank you so much.

Starting point is 00:00:44 Okay, the first big tax change for 2025. The IRS is adjusting the standard deduction to account for inflation. Now, quick refresher, when you pay taxes, you have the option of taking the standard deduction or itemizing your deductions, which is where you calculate them one by one. Itemizing, more of a hassle, but it can be worth it if your itemized deductions add up to more than the standard deduction. But most Americans just take the standard deduction. because we're not afraid to be lazy, and usually it makes the most financial sense.

Starting point is 00:01:11 Now, this amount is different depending on your filing status, but for 2025, the standard deduction is going up for everyone. Here's the scoop. Single filers, your standard deduction bumps up to $15,000, a $400 increase from 2024. Married filing jointly, you get a $30,000 deduction, up by $800, and heads of household, yours rises to $22,500, an increase of $600. This means more of your income is shielded from taxes, which is always a good thing. The second big change for 2025, adjusted tax brackets. The IRS is tweaking the income thresholds for tax brackets to keep up with inflation, and we love a tweaked threshold.

Starting point is 00:01:48 Tax brackets went up across the board, which is a good thing in this case. These adjustments help prevent something called bracket creep, where inflation pushes you into a higher tax bracket, even though your purchasing power has not changed. Side note, bracket creep, also my username for the ESPN Tournament Challenge. Just kidding. I don't even know what sport is. The team, the team, go team, go sports. And these adjusted brackets could also cause some households to fall into a lower tax bracket

Starting point is 00:02:13 leading to a lower tax bill. Let's call that a win. The third big tax change coming this year is a boost to the earned income tax credit. EITC, yeah, you know me. This credit helps low to moderate income workers and families get a tax break. And if you qualify, you can use the credit to reduce the taxes you owe and maybe increase your refund. In 2025, the maximum credit for taxpayers with three or more qualifying children increases to $8,046, which is up $216 from 2024. Now, this won't apply to everyone. To qualify, you need to meet some specific criteria like income limits and investment income thresholds.

Starting point is 00:02:48 But still some good news for a lot of low-to-moderate income earners. The fourth big tax change has to do with retirement contribution limits. The IRS has increased the contribution limit for 401K plans by $500, which is great for those of you who have enough financial markets. to max out your retirement accounts. However, the limit for individual retirement arrangements, aka IRAs, remains unchanged. Sorry. Now, catch-up contribution limits are also staying the same. Sort of. Starting in 2025, people age 60 to 63 can make catch-up contribution limits of up to $11,250, which is $3,750 higher than the standard catch-up contribution limit. Now, this will affect a small percentage of taxpayers, but still better than nothing.

Starting point is 00:03:31 The fifth big change has to do with the alternative minimum tax, which is essentially the IRS's way of making sure high earners don't get too many tax breaks. Basically, if your regular tax bill gets too low thanks to deductions and credits, the AMT kicks in to make up the difference. And for 2025, the IRS is raising the AMT exemption, which is the amount of income you can have before the tax applies. Here's the breakdown. For single filers, the exemption increases to 88,100, which is up from 85,700.

Starting point is 00:03:59 For married filing jointly, the exemption rises to $137,000, up from $133,300. This increase means fewer households will get hit with the AMT, which is a win for people whose income is pretty high, but not quite high enough to sit in the family section at the presidential inauguration. The next big tax change for 2025 has to do with flexible spending accounts or FSAs. An FSA is an employer-sponsored savings account that allows employees to set money aside each year to cover the cost of qualified medical expenses, like these dope dieticians. Plibeatic socks. Last year, the max you could contribute to your FSA was $3,200. But this year,

Starting point is 00:04:34 that jumps to $3,300. Plus, you can now carry over up to $660 to the next year instead of that money disappearing. That means more tax-free money for doctor visits, prescriptions, and Band-Aids to cover the bruise you got when your phone fell on your face while you were scrolling TikTok in bed. So relatable. The seventh big tax change for 2025 is an increase in the estate and gift tax exemptions. Here's what that means. If you're planning to pass down wealth, or receive a major gift, you can transfer a bit more tax-free before Uncle Sam wants you to file some paperwork. In 2024, the annual exclusion for gifts was $18,000 per individual. For 2025, that goes up to $19,000.

Starting point is 00:05:12 That means you're able to give $1,000 more per year without triggering gift tax reporting requirements. And the estate tax exclusion is increasing to $13.99 million per individual, a $380,000 bump from 2024. You couldn't have rounded it up to $14. Fix it, Elon! What are you doing in there, man? We're trying to get rid of social... Shut up. Shut up and round up, bro.

Starting point is 00:05:35 The room for approval. Anyway, that exemption means you can transfer up to this amount at death without getting hit with federal state taxes. This allows you to pass on more money to your family, your favorite charity, or your pet lizards because they were the only ones who stood beside you when you went through that breakup last year. It's personal.

Starting point is 00:05:54 Sure got a lot of baggage. Big tax change number eight, the adoption tax credit gets a bump. If you're thinking about expanding your family through adoption, good news for you. The adoption tax credit covers qualified expenses related to adoption, which is typically very expensive. In 2025, the adoption tax credit increases to $17,280, up $470 from last year. Not a huge increase there, but again, every little bit helps. Okay, so the IRS has already made some changes that might actually help you keep more of your money. But how can you make sure you owe as little taxes as possible next year? Well,

Starting point is 00:06:27 there's a few things you can do. But before we get to how to save money on your taxes, let's talk about saving money on your phone plan. And you can do that easily by switching to Tello, a sponsor of today's episode. Tello has crazy affordable plans that gives you the same reliable coverage and features as the big guys, but with pricing as low as five bucks. And if you want to never worry about data limits, the Unlimited Everything plan is just $25 a month. And here's the cool part.

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Starting point is 00:07:36 Okay, back to tax savings. Here are four things you can do to make sure you're not stuck with a huge tax bill next year. Number one, adjust your tax withholding. If you owed a lot of money this year, you might need to tweak how much tax gets taken out of each paycheck. Now, this might sound complicated, but it's usually pretty simple. Just get with your HR department or log into your payroll system and update your W4 form to withhold more. This can help you avoid owing a big chunk next year. But remember, the goal is not to get a big refund at tax time.

Starting point is 00:08:02 If you're getting a refund, it's because you've been overpaying and essentially loaning your money to the government interest-free. Not cool. So the goal is to get to as close to zero as possible. So you don't owe much, but you're not getting a faux refund that was already your money to begin with. And believe it or not, there's actually a decent calculator on the IRS website to help you figure this out.

Starting point is 00:08:20 Never thought I'd say this not ironically, but... Thanks, IRS. You did good, kid. You did good. Thanks. Dad. Number two, contribute more to your retirement accounts. Traditional 401ks and traditional IRAs are funded with pre-tax dollars,

Starting point is 00:08:35 which means you can take a deduction come tax time, which can lower your tax bill this year. But remember, since you're not paying taxes on the money you put into these traditional accounts, you'll pay taxes on that money and its growth when you take it out in retirement. So here's the deal. I'm a big fan of the Roth versions, Roth 401K, Roth IRAs. You pay taxes now, but then you forget about it. It grows tax-free, and you take it out tax-free. But here's the kicker.

Starting point is 00:08:57 don't get a tax deduction for the Roth side, but I'll take eternal tax regrowth any day. Number three on the list, claim every tax credit and deduction you can. Deductions can reduce your amount of taxable income, and credits can simply reduce the amount of tax due. So deductions are on the front end, and the credits are on the back end. Some examples of this include the child tax credit if you have kids, the earned income tax credit if you qualify, the savers credit if you contribute to retirement accounts, and the electric vehicle tax credit if you buy a qualified electric vehicle or plug-in hybrid. Now, there are plenty more. We don't need to cover all of them here. Any good tax software and any good tax pro can walk you through all of these to make sure you're not leaving money on the table. Which leads us to number four. Work with a tax pro. If your taxes are getting complicated or you just want to save some time and make sure you save as much money as you can, don't just click a few buttons in the free version of a random tax software and hope for the best. A good tax pro can help you find extra deductions, avoid common mistakes, and make sure you're not overpaying. Yes, a tax pro costs money, but if they help you save more than they charge, it's not.

Starting point is 00:09:56 totally worth it. So if you want to connect with a vetted tax pro like the one I use, I'll drop a link in the description below to find one in your area. If you want a deeper dive on taxes, check out our free resources at ramsysolutions.com slash tax. We're going to take out all the stress for you. You're going to find a tax filing cheat sheet, a beginner's guide to taxes, a tax prep checklist, and more, all completely free. So go check it out using the link in the description below. And if you want to play a nerdy version of Mythbusters, check out this next video to see five tax myths broke people believe. Or click the link in the Thanks for watching. We'll see you next time.

George Kamel - The Biggest Tax Changes In 2025

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