Tax Planning 2025: Key Updates to Know

February 4, 2025

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In this article, we’ll go over some important federal tax information to help you prepare for the tax-filing season and plan ahead for the 2025 tax year with confidence. As always, if you have questions about your personal tax situation, it’s a good idea to consult a tax professional. The general overview provided below is intended to help inform your financial planning conversations with your tax, estate, and/or wealth advisors.

Planning note: Be aware that many of the individual and business tax provisions that came into effect under the Tax Cuts and Jobs Act of 2017 (TCJA) are scheduled to expire at the end of 2025. It remains to be seen whether Congress will extend or modify those expiring provisions, which include various tax deductions, credits, rates, and exemptions.

As part of your overall financial planning, consider reviewing and preparing for these potential changes with your tax or wealth advisor. They can help you navigate relevant developments, identify opportunities, and update your tax planning strategy as needed.

Individual income tax

1. Standard deductions

The standard deduction is the specific dollar amount you could take on your tax return to reduce your overall taxable income. The amount of the deduction is usually adjusted each year by the IRS for inflation and varies based on your filing status and age. You may also be able to claim a higher standard deduction amount if you’re 65 or older and/or blind.

Filing Status

Single

Married filing separately

Head of household

Married filing jointly

2024

$14,600

$21,900

$29,200

2025

$15,000

$22,500

$30,000

Taxpayers who are blind and/or age 65 and older may qualify for an additional standard deduction amount. For instance, for the 2024 tax year, the additional standard deduction amounts for those who are 65 and older or blind are: $1,950 for single or head of household and $1,550 for married or qualifying surviving spouse.

Planning note: Many tax filers are eligible to take the standard deduction. Claiming the deduction generally doesn’t require any additional tax forms; it’s typically an option you can select on your Form 1040, which can be a real time-saver during tax season.

2. Itemized deductions

While most taxpayers typically choose to take the standard deduction, some may choose to itemize deductions instead. Individuals usually select the deduction method that provides the largest reduction to their taxable income . But everyone’s tax situation is different, so consult a tax professional to determine the best way to file your returns. Read more: Standard deduction vs. itemized deductions.

If you choose to itemize, here are some common deductions that may be relevant to you. You can also refer to Schedule A (Form 1040) to see the official list of itemized deductions.

Mortgage interest deduction. Generally, you may deduct the mortgage interest you pay on your main home, where you reside most of the time, or on your second home. Per the IRS, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of your mortgage debt. However, higher limitations – $1 million (or $500,000 if married filing separately) – apply if you are deducting mortgage interest from a loan taken out before December 16, 2017.

State and local income tax deductions (SALT). The deduction for state and local taxes (including real estate taxes) is capped at $10,000 for joint filers or $5,000 if married filing separately.

Planning note: The current dollar limits on the SALT deduction and home mortgage interest deduction came into effect under the Tax Cuts and Jobs Act and are set to expire at the end of 2025. These provisions, along with other tax laws, may be subject to change this year depending on congressional action. Consult a tax professional to stay up-to-date on the latest developments.

Medical expense deduction. Generally, you may deduct any unreimbursed medical and dental expenses if they exceed 7.5% of your adjusted gross income (AGI) for the given tax year. Deductible expenses may include visits to the doctor or dentist and hospital stays (see IRS Topic #502 for more details).

Charitable giving. Charitable contributions to qualified organizations may be deductible in the year of your gift. The deduction may be limited to a percentage of your AGI depending on the assets you gift (e.g., cash vs. non-cash) and the charity to which you donate (e.g., public charity vs. private foundation).

Planning note: Your deduction for charitable contributions generally can't be more than 60% of your AGI, but in some cases 20%, 30%, or 50% limits may apply. See IRS Publication 526 for details. Deduction eligibility rules can be complex – consult a financial or tax advisor to understand what limitations may apply to you.

Also, be aware that the IRS expects taxpayers to maintain proper documentation (e.g., receipts) for their charitable donations. For instance, for any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a written acknowledgment from the qualified organization noting the amount of the cash donation and a description of any property contributed.

Retirement planning

As you plan out your contributions for the year, keep in mind that different types of retirement accounts come with different rules and tax considerations. The IRS typically adjusts contribution limits each year for inflation. Below is a summary of key contribution updates for 2025.

Contribution limits

401(k) plans

Standard annual contribution limit

Standard catch-up contribution limit (age 50 or older)

Higher catch-up contribution limit (age 60-63)*

2024

$23,000

$7,500

n/a

2025

$23,500

$7,500

$11,250

*effective starting in 2025

Planning note: Under SECURE Act 2.0, starting in 2025, 401(k) plan participants age 60 to 63 will have a higher catch-up contribution limit. The higher catch-up contribution limit for 2025 is $11,250 (instead of $7,500). This means that those age 60 to 63 could contribute up to a total of $34,750 to their 401(k) in 2025. See the IRS press release here for more information.

Read more: What is a 401(k)?

IRAs (Traditional and Roth)

Standard annual contribution limit

Standard catch-up contribution limit (age 50 or older)

2024

$7,000

$1,000

2025

$7,000

$1,000

Visit IRS.gov for more information about IRA rules.

Planning note: Keep in mind that if you have both a Traditional and Roth IRA, the total contributions you make each year to all of your IRAs cannot exceed the annual contribution limit. See IRS's "IRA Contribution Limits" for more information.

SEP IRA

Standard annual contribution limit

2024

$69,000 or 25% of compensation, whichever is less

2025

$70,000 or 25% of compensation, whichever is less

Reminder: SEPs are funded by employer contributions only. Generally, SEP IRAs do not allow catch-up contributions. Visit IRS.gov for more information.

SIMPLE IRA

Standard annual contribution limit

Standard catch-up contribution limit (age 50 or older)

Higher catch-up contribution limit (age 60 to 63)*

2024

$16,000

$3,500

n/a

2025

$16,500

$3,500

$5,250

*effective starting in 2025; visit IRS.gov for more information.

Planning note: Under Secure Act 2.0, starting in 2025, a higher catch-up contribution limit applies to individuals age 60 to 63 who participate in SIMPLE plans. That higher catch-up contribution limit is $5,250 for 2025. Visit IRS.gov for more information.

Read more: Types of retirement plans

A quick reminder about RMDs

RMDs are withdrawals you must make from certain types of retirement accounts each year starting at age 73. For instance, RMD rules apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, etc. (The IRS provides a list of account types here.)

RMDs are an important consideration in retirement planning (failure to take RMDs correctly may result in penalties). If you’ve reached (or you’re approaching) your RMD age, you may want to check in with your financial advisor to understand your obligations and the potential strategies that could help minimize the tax impact.

Estate planning

The federal government may tax the transfer of your estate after your death if it exceeds a certain value. However, the IRS provides an exemption amount that’s typically adjusted each year.

For 2025, the federal estate and gift tax exemption amount is $13.99 million per person ($13.61 million in 2024).

In other words, for the 2025 tax year, estates with combined gross assets and prior taxable gifts of more than $13.99 million would need to file an estate tax return (Form 706). Visit the IRS webpage for more information.

Planning note: Like other individual tax provisions under the Tax Cuts and Jobs Act, the federal estate and gift tax exemption level is subject to change at the end of 2025 depending on congressional action.

High net-worth individuals may want to speak with their financial advisors who can help navigate any potential changes to the exemptions. Generally, generational wealth planning strategies can take time to implement and require working with a team of estate planning professionals.

Read more: Federal estate tax

This article is for informational purposes only and is not a substitute for individualized professional tax advice. Individuals should consult their own tax advisor for matters specific to their own taxes. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendations in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements of any information contained in this document and any liability therefore is expressly disclaimed.