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.
Contributions to Trump accounts will be treated as completed gifts that are not future interests in property and the gift tax annual exclusion amount will apply under a safe harbor for certain donors making contributions to Trump accounts created under Code Sec. 530A.
Contributions to Trump accounts will be treated as completed gifts that are not future interests in property and the gift tax annual exclusion amount will apply under a safe harbor for certain donors making contributions to Trump accounts created under Code Sec. 530A.
Pursuant to the rules of Code Sec. 530A, distributions from Trump accounts are limited during the growth period, which is the period ending on January 1 of the year in which the account beneficiary attains age 18. During the growth period, annual contributions are limited to $5,000 per year, as adjusted for inflation after 2027. Gifts of future interests in property are not eligible for the annual gift tax exclusion and must be reported on a federal gift tax return.
The safe harbor applies for a particular year if the following requirements of section 4.02 are met:
- The taxpayer is an individual;
- The only taxable gifts made by the taxpayer during the calendar year are cash contributions to one or more Trump accounts, each made before the calendar year in which the account beneficiary attains age 18;
- The taxpayer's total gifts during the calendar year to each individual who is an account beneficiary, including contributions to that individual beneficiary's Trump account, do not exceed the Code Sec. 2503(b) annual exclusion;
- Such contributions to Trump accounts during the calendar year do not generate for that year either a gift or generation-skipping transfer (GST) tax liability after application of the taxpayer's remaining applicable credit amount against the gift tax or remaining GST exemption; and
- Disregarding the Trump account contributions described in section 4.02(2) of the revenue procedure, a gift tax return is not required to be filed, and no gift tax return is otherwise filed for that calendar year by or on behalf of the taxpayer for any other purposes.
If these requirements are satisfied, each Trump account contribution made by the taxpayer during the calendar year will be treated as a completed gift to the account beneficiary that is not a future interest in property and to which the annual exclusion applies for purposes of gift and GST tax reporting. As a result, taxpayers within the scope of the safe harbor will not be required to file a gift tax return reporting the such contributions.
The IRS has issued final regulations identifying certain Charitable Remainder Annuity Trust (CRAT) transactions and substantially similar transactions as listed transactions subject to the reportable transaction disclosure rules. The regulations require participants and material advisors to disclose these transactions to the IRS while clarifying that charitable organizations whose only interest is as charitable remaindermen are not treated as participants or parties to prohibited tax shelter transactions. The regulations are effective July 9, 2026.
The IRS has issued final regulations identifying certain Charitable Remainder Annuity Trust (CRAT) transactions and substantially similar transactions as listed transactions subject to the reportable transaction disclosure rules. The regulations require participants and material advisors to disclose these transactions to the IRS while clarifying that charitable organizations whose only interest is as charitable remaindermen are not treated as participants or parties to prohibited tax shelter transactions. The regulations are effective July 9, 2026.
Under Code Secs. 6011 and 6707A, the IRS may identify transactions with tax avoidance potential as listed transactions. The final regulations add Reg. §1.6011-15, identifying transactions in which appreciated property is contributed to a purported CRAT, sold by the trust, and the sale proceeds are used to purchase an annuity, with the beneficiary improperly treating the annuity payments under Code Sec. 72 instead of applying the distribution ordering rules of Code Sec. 664(b).
Although participants and material advisors remain subject to the applicable disclosure requirements, organizations described in Code Sec. 170(c) that merely receive the charitable remainder interest are excluded from participant status and are not treated as parties to prohibited tax shelter transactions under Code Sec. 4965 solely because of that interest. The IRS finalized the regulations without substantive changes from the proposed regulations issued in 2024.
A portion of litigation settlement proceeds consisting of attorney’s fees and costs was includible in the gross income of two individuals (taxpayers). Said portion was not deductible under Code Sec. 62(a)(20). The Fair Credit Reporting Act’s (FCRA) (P.L. 91-508) fee-shifting provisions were inapplicable in this case.
A portion of litigation settlement proceeds consisting of attorney’s fees and costs was includible in the gross income of two individuals (taxpayers). Said portion was not deductible under Code Sec. 62(a)(20). The Fair Credit Reporting Act’s (FCRA) (P.L. 91-508) fee-shifting provisions were inapplicable in this case.
Background
The taxpayers sued multiple credit reporting agencies under FCRA provisions. They eventually settled with each agency. In all relevant Forms 1099–MISC the settlement amounts were reflected without the attorney’s fees and costs.
Civil Rights Interpretation for FCRA Claims Denied
The taxpayers’ FCRA claims of unlawful discrimination did not fall under Code Sec. 62(e)(18)(i). Said claims were based on fair and accurate credit reporting and not consumer privacy. Particularly, the taxpayers’ concerns did not fall under “highly sensitive” and “intimate personal information” categories.
J.W. Eiler, 167 T.C. No. 3, Dec. 62,865
The IRS has reminded taxpayers that major life events can affect tax filing requirements, eligibility for tax benefits and the amount of tax withheld from paychecks. The agency explained that changes such as marriage, the birth or adoption of a child, divorce or the death of a loved one may require updates to tax information and a review of filing status.
The IRS has reminded taxpayers that major life events can affect tax filing requirements, eligibility for tax benefits and the amount of tax withheld from paychecks. The agency explained that changes such as marriage, the birth or adoption of a child, divorce or the death of a loved one may require updates to tax information and a review of filing status. A name change following marriage should be reported to the Social Security Administration so the updated name matches Social Security records. An address change should be reported to the IRS by filing Form 8822, Change of Address, and employers, financial institutions and the U.S. Postal Service should also be notified. Marriage may also require submission of a new Form W-4, Employee's Withholding Certificate, to ensure the correct amount of tax is withheld.
Additionally, the IRS noted that the birth or adoption of a child may make a taxpayer eligible for valuable tax benefits, including the Child Tax Credit, Adoption Credit and Child and Dependent Care Credit, if applicable requirements are satisfied. Divorce or the death of a spouse may also affect filing status, tax withholding and eligibility for certain tax benefits. The IRS encouraged prompt updates to tax records, careful evaluation of changes affecting tax obligations and use of available IRS resources to better understand the tax consequences of major life events. Early action can help avoid filing issues, support accurate tax reporting, maximize available tax benefits and improve preparation for the next tax filing season.
The Internal Revenue Service received and processed less returns during 2026, according to the Treasury Inspector General for Tax Administration.
The Internal Revenue Service received and processed less returns during 2026, according to the Treasury Inspector General for Tax Administration.
In a recently released report, TIGTA stated that from March 1, 2025, through February 28, 2026, the IRS received 51.5 million tax returns, down from 52. 4 million in the previous year, though it did see a significant drop in paper returns received from 1.2 million in 2025 to 618,000 in 2026. Of the returns received in 2026, the agency processed 50.9 million returns, down from 51.8 million.
From the beginning of the 2026 tax filing season to the end of February 2026, TIGTA reported that the inventory backlog in key tax return processing programs increased from 1.9 million to 2.4 million. Additionally, nearly 75 percent of the amended return inventory is over-aged during the 2026 tax filing season.
“Generally, inventories increase during the filing season as the IRS balances efforts to answer phone calls and reduce inventories,” TIGTA stated in the report. “However, with the reduction in staff, increases in key inventories could become a concern.”
The number of refunds dipped to 36.5 million from 36.9 million, although there was a $360 increase in the average refund from $3,382 in 2025 to $3,742.
TIGTA also reported that the IRS did not meet its hiring goals for the 2026 tax filing season. The agency had been approved to hire 1,900 employees for submission processing (these workers process original and amended returns and resolve tax return errors) but only onboarded 800 individuals. Likewise, it was approved to hire 3,500 account management employees (handlers of taxpayer contacts through telephone and mail and process adjustments) but brought 2,300 on board.
Submission processing management said it would be onboarding new hires throughout the tax season, while account management leadership had no plans to hire new employees and would only be onboarding those who previously received offers but had delays in the hiring process.
In a positive from the 2026 season, TIGTA reported that the new and modified “e-file business rules associated with the child tax Credit, state and local tax deduction, and adoption credit are working as intended.”
Taxpayer Assistance Centers offered incorrect tax guidance during nearly half of unannounced visits by Treasury Inspector General for Tax Administration staff.
Taxpayer Assistance Centers offered incorrect tax guidance during nearly half of unannounced visits by Treasury Inspector General for Tax Administration staff.
According to a recent TIGTA report, during the 2025 tax filing season, the Treasury watchdog made 91 unannounced visits to TACs nationwide at various time (regular and extended hours), at the 61 visits where TIGTA staff did receive assistance, “TAC employees did not provide the correct tax law guidance during 28 of those visits (46 percent).”
TAC employees were presented with questions across one of the three areas – injured spouse, selling your main home, and American Opportunity Tax Credit. The report notes that for questions related to tax law topics, “TAC employees must use the Interactive Tax Law Assistant ITLA) tool to respond to taxpayers. The ITLA tool asks a series of questions, then generates accurate and complete responses based on the taxpayer’s situation. The tool is designed for TAC employees and is intended to improve operational performance in the areas of quality, efficiency, customers satisfaction, and employee satisfaction.”
TIGTA noted that during the 2025 filing season, “managers counseled several TAC employees for not using the ITLA tool during taxpayer interactions. During our site visits, we also observed that TAC employees did not always the ITLA tool to answer our tax law questions.”
Additionally, of those 91 visits, TIGTA “did not receive full assistance during 30 of our 91 visits due to incomplete or inaccurate responses to tax law questions, denial of entry by security or unexpected TAC closures.”