by Robert E. Quittner, Jr. CFP® & CMFC™
Investment Advisor Representative
[email protected]
Life often feels like a series of events, with some bigger than others. Some events are pleasurable and others we would like to avoid or skip all together. We frequently look toward the next positive occasion to motivate us forward from month to month. As I was driving into the office yesterday morning, the temperature gauge read 17 degrees, and my mind quickly shifted to the warm tropical environment of Cancun. That’s where I’ll be next month along with Peter and several others from our office.
Last year we were consumed with one big event, namely who would occupy the White House for the next four years. Next came the holidays and now here we are starting a new year. One event we would all like to skip takes place on April 15th. We talk about taxes all year long and in just about every meeting, but going into the new year, a lot of people are focused on preparing their annual tax return.
Since the 2025 federal tax tables are available, I ran an analysis of the differences in the tax due in 2024 and what that same income level would be like in 2025. Now I could fill up the rest of this article with a detailed analysis of numerous situations, but I thought it was better to compare a few common scenarios.
Scenario 1 is a couple, married filing jointly and both under age 65. No kids and they do not itemize and take the standard deduction. The far-right column lists the difference between the 2024 estimated tax due and 2025. As the red numbers indicate, the estimated federal tax due actually drops slightly. Nothing to plan a vacation around, but at least the tax due didn’t increase.
Scenario 2 is a couple, married filing jointly and, in this scenario, they are both 65 or older. No kids and they do not itemize and take the standard deduction. In this scenario as well, the estimated federal tax due drops slightly.
Filing single follows the same pattern. It might be comforting to know that your estimated federal taxes aren’t going up given the same income level in 2025. The real wild card is what 2026 will bring. These tax schedules are part of the Tax Cuts and Jobs Act (TCJA). The TCJA was a major overhaul of the tax code and was signed into law on Jan. 1, 2018. Key provisions will expire, or “sunset,” on December 31, 2025, reverting tax laws to pre-TCJA rules for 2026 unless Congress acts to prevent this. The new administration is focused on extending these tax schedules so we will be keeping a close watch on the progress. The threat of sunsetting has guided some tax planning decisions over the last few years and 2025 will be no different.
Although we don’t hold ourselves out to be CPAs, we know a fair amount about how taxes affect your financial situation today and that of your heirs. If you would like to discuss this in further detail, please don’t hesitate to schedule a meeting with Peter, Kyle, Mike, Nick, or me.
Stay warm and keep good thoughts as we root for Punxsutawney Phil to make the right call this year!
Rob