Key Tax Benefits and Policies in 2025 That might be gone in 2026

Tax Benefits in 2025: In the absence of Congressional intervention, numerous tax adjustments are on the horizon for 2026, encompassing elevated tax rates and diminished standard deductions. In the near future year is poised for significant tax modifications, all stemming from the repercussions of the 2017 tax reform legislation, which rendered numerous individual tax provisions impermanent.

In the near future, significant tax revisions are on the horizon for 2026. The impetus behind these changes stems from the legislation passed in 2017 aimed at tax reform. The majority of individual tax measures established were intended to be only temporary, with a set expiration date set for the year 2025. Should Congress choose not to extend these provisions, they will automatically revert to the regulations enacted 2017 come January 1, 2026.

2025 Tax brackets: The individual income tax rates of 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent may go back to 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent, with different income-level break points and brackets than now.

Greater standard deductions: The 2017 law more than doubled these breaks.

Greater child tax credits: In the past, child tax credits were set at $1,000, but in 2018, the amount was increased to $2,000.

Alternative minimum tax: Since 2017, the increased exemption amounts and expanded phaseout zones for the alternative minimum tax have significantly reduced the number of individual taxpayers required to pay the AMT.

The tax benefit in 2025 known as the 20% qualified business income deduction is aimed at self-employed individuals and those who hold ownership stakes in S corporations, partnerships, limited liability companies, and other similar pass-through entities.

The adjusted gross income (AGI) limitation: In tax laws, a welcomed change was implemented under the 2017 tax legislation, raising the adjusted gross income (AGI) cap on cash contributions to eligible charities from 50% to 60%.

The more significant lifetime estate and gift tax exemption: In the current year, individuals are entitled to a significantly larger lifetime estate and gift tax exemption amounting to $13,610,000 for those who pass away.

The cutback on high itemizations for upper-income taxpayers would return.

Restrictions on Popular Tax Deductions Also End After 2025.

Among them

Personal exemptions:  In the tax year of 2017, individuals were able to claim a deduction of $4,050 for both themselves and any dependents they had. To illustrate, a household consisting of three individuals could benefit from a total deduction of $12,150 through personal exemptions. However, this provision was removed entirely with the implementation of the 2017 tax law.

The maximum of $10,000 cap on tax deducting local and state taxes on Schedule A of the 1040: Introducing a $10,000 ceiling on the deduction of state and local taxes listed on Schedule A of the 1040 form promises to provide much-needed respite to individuals burdened with substantial property and state income tax obligations.

The 2017 law implemented changes to the home mortgage interest deduction. The 2025 tax deduction limit for interest on home acquisition debt has been reduced from $1 million to $750,000.

Incorporated into Schedule A, various 2025 tax deductions are subject to the 2% of Adjusted Gross Income threshold. Until 2025, the category of itemized deductions has been removed by the 2017 law. Items no longer eligible for deduction include unreimbursed employee expenses such as travel, meals, and education costs, brokerage and IRA fees, hobby-related expenses, and tax return preparation fees.

Theft and casualty losses: 2025 Tax deductions for theft and casualty losses are limited to those incurred in areas designated as federal disaster zones, as specified by existing regulations for reporting on Schedule A.

Job-related moving expenses: Now, only members of the military get the break.

Two important tax breaks are set to expire in 2025, marking the end of certain benefits not included in the 2017 legislation. Specifically, the extension of the Obamacare health premium credit to a broader group of individuals purchasing insurance through a marketplace will cease. 

Additionally, the exemption from federal income tax for forgiven student loan debt accumulated between 2021 and 2025 will come to an end. This exception contrasts with the typical taxation of income resulting from debt cancellation.

Maximizing My Tax Benefits in 2025 with a Dedicated Tax Professional

Our dedicated Tax Professional will walk you through this complicated process from start to finish for accurate tax filing and maximum tax return in 2025.

This entry was posted on Thursday, May 16th, 2024 at 8:00 am and is filed under Tax Deductions and Credits, Tax News, Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.