Ensuring a Client-centric Financial Planning Process
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Insights and best practices for successful financial planning engagement
• Michelle Riiska • March 27, 2025
With tax policy constantly evolving, staying current on legislative updates and proactive tax planning is crucial for financial advisors aiming to maximize clients’ wealth. In a recent webinar, I discussed the enacted and proposed tax changes that could significantly impact high net worth individuals.
From inflation adjustments taking effect in 2025 to SECURE Act 2.0 provisions effective this year, financial professionals would be wise to pay close attention. While the future of tax reform remains uncertain, this is a prime opportunity to model different scenarios and implement strategies to minimize clients’ tax burdens.
This year brings a host of tax updates, while additional provisions of SECURE Act 2.0 introduce new considerations to retirement planning. Additionally, potential future tax legislation looms on the horizon, promising to further impact your clients’ tax plans.
Navigating this intricate maze of tax laws and proposals requires a proactive approach. By staying informed and adapting your strategies accordingly, we can better guide our clients through the complexities of tax planning.
Tax brackets were adjusted for inflation for 2025. Notably, the current top tax rate remains at 37 percent, which could increase next year if TCJA sunsets. It’s essential for taxpayers to understand how their income level aligns with the applicable tax brackets—see the IRS website for the full 2025 income brackets.
Standard deductions have been adjusted to account for inflation, providing some relief for taxpayers. For single filers, the standard deduction has increased to $15,000, while married couples filing jointly can claim a $30,000 deduction. Heads of household will see their standard deduction rise to $22,500.
The Alternative Minimum Tax (AMT) exemption amount has also been revised. Single taxpayers can now claim an exemption of $88,100, with a phaseout threshold of $626,350. For married couples filing jointly, the exemption amount is $137,000, and the phaseout begins at $1,252,700.
Estate planning has also seen an inflationary update, with the estate tax exclusion amount increasing to $13.99 million. This means that individuals can transfer up to this amount during their lifetime or upon death without incurring federal estate taxes.
Additionally, the annual gift tax exclusion has been raised to $19,000, allowing taxpayers to gift this amount to an unlimited number of recipients without triggering gift tax consequences.
Retirement account contribution limits have also been adjusted upward. For example, the contribution limit for 401(k) plans has increased to $23,500, with an additional catch-up contribution of $7,500 for individuals over 50. For those between the ages of 60-63, SECURE 2.0 allows for a catch-up of 150% of current catch-up limits, meaning those in the 60-63 age range can take advantage of catch-up contributions totaling $11,250 this year. This provides an opportunity for individuals to maximize their retirement savings and potentially reduce their taxable income.
The SECURE 2.0 Act, officially known as the Setting Every Community Up for Retirement Enhancement 2.0 Act, is a comprehensive piece of legislation aimed at improving retirement security for Americans. This act builds upon the original SECURE Act, which was signed into law in 2019, and introduces several new provisions this year designed to increase access to retirement plans and encourage greater savings.
Overall, the SECURE 2.0 Act represents a significant step forward in addressing the retirement savings crisis in the United States.
While the specifics remain uncertain, several proposals have been circulating that could significantly impact tax planning strategies in 2025.
One of the most widely discussed topics is the extension or modification of the Tax Cuts and Jobs Act (TCJA), which is set to expire after 2025. The TCJA introduced sweeping changes, including lower individual tax rates, increased standard deductions, and modifications to various deductions and credits. Lawmakers may choose to extend, modify, or let these provisions expire, which could have far-reaching implications for taxpayers.
Additional conversations have included the elimination of tax on tips, Social Security, overtime, as well as adjustments on how the SALT cap and other deductions are handled.
As we step into 2025, there’s a lot of buzz around potential tax changes. Here’s a breakdown of what’s happening and what might be on the horizon.
The House of Representatives approved a budget resolution for the fiscal year 2025 on February 25th.
The House budget is a guideline for committees to adjust their budgets—no specific tax changes yet. It includes:
The TCJA, enacted in 2017, is set to sunset at the end of 2025. Here’s what an extension could mean:
The idea of eliminating federal tax on Social Security payments has received much attention since the beginning of the year. Earlier this year, the You Earn In, You Keep It Act proposed eliminating federal income tax while funding the change through adjusting the income cap on earnings subject to payroll tax. While this piece of legislation was not passed, other proposals such as the Senior Citizens Tax Elimination Act are also aimed at making Social Security tax free at the federal level.
The No Tax on Tips Act proposes exempting tipped workers’ income (up to $25,000 annually) from federal taxation, focusing on traditionally tipped professions. Similarly, the Tipped Income Protection and Support (TIPS) Act and the Tip Tax Termination Act offer variations of this idea, aiming to reduce tax burdens and improve worker protections.
Reducing or eliminating tax on overtime pay has been a highly publicized topic in 2025. Several ideas have been floated, though time will tell what is written into law. The Overtime Pay Tax Relief Act of 2025, for example, would allow overtime pay to be deducted so long as it does not exceed 20% of an employee’s other income from the same employer for the year, with taxpayer AGI limits for qualifying.
While specifics are still unclear, these proposals could significantly impact taxpayers, especially in high-cost-of-living states. Keep an eye on developments as the legislative process unfolds.
Tax legislation is a moving target, with lots of ideas being floated in different phases of discussion. Let’s briefly explore some of the recent proposals.
Legislators are considering several different approaches to address the much-debated SALT cap. Ideas include the following:
One idea involves eliminating the deduction for primary residences altogether, which could shift the financial dynamics for homeowners. Another suggests reducing the mortgage debt eligible for deduction from $750,000 to $500,000, potentially impacting future homebuyers.
This is part of the Death Tax Repeal Act, which proposes the elimination of the federal estate tax—a significant change last seen in 2010 (and only for one year). The act also includes modifications like repealing the generation-skipping transfer tax, reducing the gift tax rate while imposing a gift tax exemption, and retaining basis adjustment at death.
Another proposal suggests eliminating the tax exclusion for interest on state and local bonds at the federal level. This could increase costs for bond investors while potentially impacting state and local governments’ ability to raise funds.
Some discussions revolve around allowing deductions for auto loan interest on federal taxes. This would provide some relief to vehicle owners while encouraging auto financing.
A concept under review is to tax employees on fringe benefits provided by employers. Examples include health insurance or transportation benefits, which could alter employee compensation structures.
Specific credits, such as the American Opportunity Credit, the Lifetime Learning Credit, and the $2,100 Child and Dependent Care Credit, have been mentioned for potential removal. Such changes could reduce tax savings for families and students, impacting financial planning.
The uncertainty surrounding these proposals reminds us to stay informed and adapt our planning strategies. It’s crucial to follow developments and ensure readiness for when changes solidify.
Learn more about 2025 tax law proposals and insights by watching the full webinar here: 2025 Tax Legislation Insights and eMoney Analysis.
DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.
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