July 2025 Financial Planning Strategies
While we talk about the economic impact of the tax bill in the investment section, there are also some things for us to highlight on the personal financial planning side of the recently passed bill.
The 2017 tax rate cuts will not expire after this year – had this not been included, the tax brackets would have increased from:
12% to 15%
22% to 25%
24% to 28%
32% to 33%
37% to 39.6%
Your standard deduction will not be cut in half after this year – for those that don’t have itemized deductions that total more the standard deduction, your base standard deduction will be:
$15,750 if Single (S)
$31,500 if Married Filing Jointly (MFJ)
This amounts will be inflation adjusted going forward.
There is an additional $6,000 deduction for each individual 65 and older. That amount is reduced if your income is over $150,000 MFJ ($75,000 S). For example, if your income is $160,000, the deduction would be $6,000 – ($10,000 x 6%) = $5,400.
The child tax credit is increasing from $2,000 to $2,200 starting this year and starting next year will be increased by a cost-of-living adjustment.
Small business owners will not lose the 199A Qualified Business Income (QBI) deduction which is a 20% deduction of their business income. This is the deduction for owners whose business income flows through to their personal tax return and doesn’t get the benefit of a reduced corporate tax rate.
For those that are itemizing deductions and have been capped at $10,000 for deducting state and local taxes will get additional deductions because that SALT cap has been increased to $40,000 this year and will increase to $40,400 in 2026 and continue to increase by 1% annually until 2030 when it will revert back to $10,000. If you’re not sure if this affects you, first check line 12 of your tax return to see if you are taking the standard deduction or itemizing. If you’re taking the standard deduction, it doesn’t affect you unless you know your state income and property taxes paid were limited to $10,000 and were higher. If you are already itemizing then check Schedule A. If the amount under “Taxes You Paid” equal more than $10,000 then that amount (up to $40,000) can be deducted in 2025. and not wasted by virtue of the cap.
No tax on tips – no, you can’t classify all of your income as tips now, it has to be qualified, is up to $25,000, and is effective from 2025 through 2028. The deduction is also reduced by $100 for each $1,000 by which your gross income exceeds $300,000 MFJ ($150,000 S). This deduction is still allowed EVEN if you are taking the standard deduction.
No tax on overtime – another new deduction up to $25,000 on overtime pay if MFJ ($12,500 S) with the same income-based reduction as the tips deduction.
There is a new deduction up to $10,000 on car loan interest if the final assembly of the car was within the US. This deduction is reduced by $200 for each $1,000 your income exceeds $200,000 if MFJ ($100,000 S).
Charitable contributions up to $2,000 MFJ ($1,000 S) will now be deductible even if you don’t itemize. Great news for charities benefiting from donors that may not have contributed recently because of higher standard deductions that left charitable donations not deductible.
The 1099-K $600 reporting threshold for Venmo, CashApp, PayPal, etc. is now a $20,000 limit. Very helpful for small merchants getting started.
EV subsidies are going away – after September 30, 2025. Also, energy efficient home improvements like new windows and solar end after December 31.
Bonus depreciation is back to 100% – if placed in service on or after January 19, 2025.
The lifetime estate and gift tax exemption is not getting cut in half, but is increasing from $13.9 million to $15 million effective 2026 and increase with inflation going forward.
If you have any questions, contact Portus Wealth Advisors.
