Many tax limits change annually based on inflation. For 2025, some limits have increased, but with inflation cooling, the increases aren’t as large as they have been in recent years.
Here are some amounts that may affect you or your business:
Many tax limits change annually based on inflation. For 2025, some limits have increased, but with inflation cooling, the increases aren’t as large as they have been in recent years.
Here are some amounts that may affect you or your business:
Retirement plans in 2025 vs. 2024
- Employee contributions to 401(k) plans: $23,500 vs. $23,000 in 2024
- Catch-up contributions to 401(k) plans: $7,500 (unchanged)
- Catch-up contributions to 401(k) plans for those age 60, 61, 62 or 63: $11,250 (not available in 2024)
Social Security
Cap on amount of employees’ earnings subject to Social Security tax for 2025: $176,100 vs. $168,600 in 2024.
Other employee benefits 2025 vs. 2024
- Qualified transportation fringe-benefits employee income exclusion: $325 per month vs. $315 in 2024
- Health Savings Account contribution limit:
- Individual coverage: $4,300 (up from $4,150)
- Family coverage: $8,550 (up from $8,300)
- Catch-up contribution: $1,000 (unchanged)
- Flexible Spending Account contributions:
- Health care: $3,300 (up from $3,200)
- Health care FSA rollover limit (if plan permits): $660 (up from $640)
- Dependent care: $5,000 (unchanged)
Potential upcoming tax changes
In addition to these and other changes due to inflation, there is a possibility of additional tax changes on the horizon with President Trump back in the White House and the Republicans controlling Congress. For example, Trump has proposed lowering the corporate tax rate (currently 21%) and eliminating taxes on overtime pay, tips, and Social Security benefits. These and other potential changes could have significant impact on businesses and individuals. Do not hesitate to contact us if you have questions about your situation.
Easy to Understand details of taking advantage of the Medical Expense Deduction.
Easy to Understand- Medical Expense Deductions Explained
Understanding the Threshold
One of the most important aspects of deducting medical expenses is the threshold. You can only deduct the amount of your qualified medical expenses that exceeds 7.5% of your adjusted gross income (AGI). This means careful tracking of your expenses throughout the year is essential.
What Qualifies as a Medical Expense?
The IRS allows you to deduct costs paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Some common examples include:
- Doctor's visits: Including co-pays and payments for services.
- Hospital services: Inpatient and outpatient care.
- Prescription drugs: Costs of medications prescribed by a doctor.
- Medical equipment: Items like wheelchairs, walkers, and oxygen equipment.
- Insurance premiums: Health insurance premiums you pay (if not paid through an employer-sponsored plan).
- Long-term care expenses: Certain costs related to long-term care.
- Mental health services: Including therapy and counseling.
- Dental care: Including checkups, fillings, and dentures.
- Transportation costs: Mileage to and from medical appointments (keep accurate records!).
- Alternative treatments: Acupuncture, chiropractic care, and other alternative therapies
What Doesn't Qualify?
It's equally important to know what doesn't qualify as a medical expense. Generally, expenses that are merely beneficial to general health, but not related to a specific medical condition, are not deductible. Examples include:
- Cosmetic surgery: Unless medically necessary.
- Over-the-counter medications: Unless recommended by a doctor.
- Personal care items: Like toiletries.
- Health club dues: Unless prescribed by a doctor for a specific medical condition.
Tips for Maximizing Your Deduction:
- Keep detailed records: Maintain all receipts, bills, and statements related to medical expenses. A spreadsheet or dedicated app can be helpful.
- Coordinate with your health insurance: Understand what your insurance covers and what you're responsible for.
- Consider a Health Savings Account (HSA) or Flexible Spending Account (FSA): These tax-advantaged accounts allow you to set aside pre-tax dollars for qualified medical expenses.
- Time your expenses: If you're close to the 7.5% AGI threshold, consider scheduling elective procedures or purchases in a year where you have other medical expenses.
Don't Leave Money on the Table!
Medical expense deductions can be complex, but they can significantly reduce your tax liability.
The American Institute of CPAs in a March 31 letter to House of Representatives voiced its “strong support” for a series of tax administration bills passed in recent days.
The American Institute of CPAs in a March 31 letter to House of Representatives voiced its “strong support” for a series of tax administration bills passed in recent days.
The four bills highlighted in the letter include the Electronic Filing and Payment Fairness Act (H.R. 1152), the Internal Revenue Service Math and Taxpayer Help Act (H.R. 998), the Filing Relief for Natural Disasters Act (H.R. 517), and the Disaster Related Extension of Deadlines Act (H.R. 1491).
All four bills passed unanimously.
H.R. 1152 would apply the “mailbox” rule to electronically submitted tax returns and payments. Currently, a paper return or payment is counted as “received” based on the postmark of the envelope, but its electronic equivalent is counted as “received” when the electronic submission arrived or is reviewed. This bill would change all payment and tax form submissions to follow the mailbox rule, regardless of mode of delivery.
“The AICPA has previously recommended this change and thinks it would offer clarity and simplification to the payment and document submission process,” the organization said in the letter.
H.R. 998 “would require notices describing a mathematical or clerical error be made in plain language, and require the Treasury Secretary to provide additional procedures for requesting an abatement of a math or clerical adjustment, including by telephone or in person, among other provisions,” the letter states.
H.R. 517 would allow the IRS to grant federal tax relief once a state governor declares a state of emergency following a natural disaster, which is quicker than waiting for the federal government to declare a state of emergency as directed under current law, which could take weeks after the state disaster declaration. This bill “would also expand the mandatory federal filing extension under section 7508(d) from 60 days to 120 days, providing taxpayers with additional time to file tax returns following a disaster,” the letter notes, adding that increasing the period “would provide taxpayers and tax practitioners much needed relief, even before a disaster strikes.”
H.R. 1491 would extend deadlines for disaster victims to file for a tax refund or tax credit. The legislative solution “granting an automatic extension to the refund or credit lookback period would place taxpayers affected my major disasters on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period,” AICPA said.
Also passed by the House was the National Taxpayer Advocate Enhancement Act (H.R. 997) which, according to a summary of the bill on Congress.gov, “authorizes the National Taxpayer Advocate to appoint legal counsel within the Taxpayer Advocate Service (TAS) to report directly to the National Taxpayer Advocate. The bill also expands the authority of the National Taxpayer Advocate to take personnel actions with respect to local taxpayer advocates (located in each state) to include actions with respect to any employee of TAS.”
Finally, the House passed H.R. 1155, the Recovery of Stolen Checks Act, which would require the Treasury to establish procedures that would allow a taxpayer to elect to receive replacement funds electronically from a physical check that was lost or stolen.
All bills passed unanimously. The passed legislation mirrors some of the provisions included in a discussion draft legislation issued by the Senate Finance Committee in January 2025. A section-by-section summary of the Senate discussion draft legislation can be found here.
AICPA’s tax policy and advocacy comment letters for 2025 can be found here.
By Gregory Twachtman, Washington News Editor
The Tax Court ruled that the value claimed on a taxpayer’s return exceeded the value of a conversation easement by 7,694 percent. The taxpayer was a limited liability company, classified as a TEFRA partnership. The Tax Court used the comparable sales method, as backstopped by the price actually paid to acquire the property.
The Tax Court ruled that the value claimed on a taxpayer’s return exceeded the value of a conversation easement by 7,694 percent. The taxpayer was a limited liability company, classified as a TEFRA partnership. The Tax Court used the comparable sales method, as backstopped by the price actually paid to acquire the property.
The taxpayer was entitled to a charitable contribution deduction based on its fair market value. The easement was granted upon rural land in Alabama. The property was zoned A–1 Agricultural, which permitted agricultural and light residential use only. The property transaction at occurred at arm’s length between a willing seller and a willing buyer.
Rezoning
The taxpayer failed to establish that the highest and best use of the property before the granting of the easement was limestone mining. The taxpayer failed to prove that rezoning to permit mining use was reasonably probable.
Land Value
The taxpayer’s experts erroneously equated the value of raw land with the net present value of a hypothetical limestone business conducted on the land. It would not be profitable to pay the entire projected value of the business.
Penalty Imposed
The claimed value of the easement exceeded the correct value by 7,694 percent. Therefore, the taxpayer was liable for a 40 percent penalty for a gross valuation misstatement under Code Sec. 6662(h).
Ranch Springs, LLC, 164 TC No. 6, Dec. 62,636
State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt private activity bonds have been provided with a listing of the proper population figures to be used when calculating the 2025:
State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt private activity bonds have been provided with a listing of the proper population figures to be used when calculating the 2025:
- calendar-year population-based component of the state housing credit ceiling under Code Sec. 42(h)(3)(C)(ii);
- calendar-year private activity bond volume cap under Code Sec. 146; and
- exempt facility bond volume limit under Code Sec. 142(k)(5)
These figures are derived from the estimates of the resident populations of the 50 states, the District of Columbia and Puerto Rico, which were released by the Bureau of the Census on December 19, 2024. The figures for the insular areas of American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands are the midyear population figures in the U.S. Census Bureau’s International Database.
The value of assets of a qualified terminable interest property (QTIP) trust includible in a decedent's gross estate was not reduced by the amount of a settlement intended to compensate the decedent for undistributed income.
The value of assets of a qualified terminable interest property (QTIP) trust includible in a decedent's gross estate was not reduced by the amount of a settlement intended to compensate the decedent for undistributed income.
The trust property consisted of an interest in a family limited partnership (FLP), which held title to ten rental properties, and cash and marketable securities. To resolve a claim by the decedent's estate that the trustees failed to pay the decedent the full amount of income generated by the FLP, the trust and the decedent's children's trusts agreed to be jointly and severally liable for a settlement payment to her estate. The Tax Court found an estate tax deficiency, rejecting the estate's claim that the trust assets should be reduced by the settlement amount and alternatively, that the settlement claim was deductible from the gross estate as an administration expense (P. Kalikow Est., Dec. 62,167(M), TC Memo. 2023-21).
Trust Not Property of the Estate
The estate presented no support for the argument that the liability affected the fair market value of the trust assets on the decedent's date of death. The trust, according to the court, was a legal entity that was not itself an asset of the estate. Thus, a liability that belonged to the trust but had no impact on the value of the underlying assets did not change the value of the gross estate. Furthermore, the settlement did not burden the trust assets. A hypothetical purchaser of the FLP interest, the largest asset of the trust, would not assume the liability and, therefore, would not regard the liability as affecting the price. When the parties stipulated the value of the FLP interest, the estate was aware of the undistributed income claim. Consequently, the value of the assets included in the gross estate was not diminished by the amount of the undistributed income claim.
Claim Not an Estate Expense
The claim was owed to the estate by the trust to correct the trustees' failure to distribute income from the rental properties during the decedent's lifetime. As such, the claim was property included in the gross estate, not an expense of the estate. The court explained that even though the liability was owed by an entity that held assets included within the taxable estate, the claim itself was not an estate expense. The court did not address the estate's theoretical argument that the estate would be taxed twice on the underlying assets held in the trust and the amount of the settlement because the settlement was part of the decedent's residuary estate, which was distributed to a charity. As a result, the claim was not a deductible administration expense of the estate.
P.B. Kalikow, Est., CA-2
An individual was not entitled to deduct flowthrough loss from the forfeiture of his S Corporation’s portion of funds seized by the U.S. Marshals Service for public policy reasons. The taxpayer pleaded guilty to charges of bribery, fraud and money laundering. Subsequently, the U.S. Marshals Service seized money from several bank accounts held in the taxpayer’s name or his wholly owned corporation.
An individual was not entitled to deduct flowthrough loss from the forfeiture of his S Corporation’s portion of funds seized by the U.S. Marshals Service for public policy reasons. The taxpayer pleaded guilty to charges of bribery, fraud and money laundering. Subsequently, the U.S. Marshals Service seized money from several bank accounts held in the taxpayer’s name or his wholly owned corporation. The S corporation claimed a loss deduction related to its portion of the asset seizures on its return and the taxpayer reported a corresponding passthrough loss on his return.
However, Courts have uniformly held that loss deductions for forfeitures in connection with a criminal conviction frustrate public policy by reducing the "sting" of the penalty. The taxpayer maintained that the public policy doctrine did not apply here, primarily because the S corporation was never indicted or charged with wrongdoing. However, even if the S corporation was entitled to claim a deduction for the asset seizures, the public policy doctrine barred the taxpayer from reporting his passthrough share. The public policy doctrine was not so rigid or formulaic that it may apply only when the convicted person himself hands over a fine or penalty.
Hampton, TC Memo. 2025-32, Dec. 62,642(M)