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August 2025 Financial Planning Strategies

Welcome to the August 2025 edition of the Portus Wealth Advisors Financial Planning Updates! As summer begins to wind down and we look toward the final months of the year, it’s a perfect time for a financial check-up. While taxes may not be the first thing on your mind in August, staying informed is a year-round necessity for building a strong financial future. The tax landscape is constantly shifting, and a quick refresher on the core concepts can help ensure you’re making the most of your hard-earned money and not overlooking valuable opportunities.

Tax Brackets

The U.S. tax system is progressive, meaning the more you earn, the higher the rate on each slice of your income. Each portion of income is taxed at its respective rate—not your entire income at one rate.

For 2025, here are the federal tax brackets for married couples filing jointly:

Income

$0 – $22,000

$22,001 – $89,450

$89,451 – $190,750

$190,751 – $364,200

$364,201 – $462,500

$462,501 – $693,750

Over $693,750

Tax Rate

10%

12%

22%

24%

32%

35%

37%

Deductions vs. Credits: Two Ways to Reduce Taxes

Deductions reduce your taxable income.

  • For 2025, the standard deduction for joint filers is $29,200.
  • You can itemize if your combined deductions (like mortgage interest, medical expenses, or charitable donations) exceed that amount.

Credits directly reduce your tax liability.

  • For example, if you’re eligible for a $2,000 Child Tax Credit, your tax bill drops by that exact amount. Other credits include the American Opportunity Credit, Lifetime Learning Credit, and Earned Income Tax Credit (EITC) for qualifying lower-income families.
  • Nonrefundable credits can lower your tax bill to zero, but not below. If you owe $1,500 in taxes and you get a $2,000 nonrefundable credit, your tax liability becomes $0—but you don’t get the extra $500 back. Examples include the Lifetime Learning Credit and Saver’s Credit.
  • Refundable credits not only wipe out your tax liability—they can generate a refund if the credit exceeds what you owe. Using the same scenario, if you owe $1,500 and get a $2,000 refundable credit, you receive $500 back. Examples include the Earned Income Tax Credit (EITC) and Additional Child Tax Credit.

Income Limits & Phaseouts

Many benefits fade or completely go away as your combined total income rises:

  • The Child Tax Credit begins to phase out at $400,000 for joint filers.
  • Education credits often phase out around $160,000.
  • The EITC income limits depend on the number of children, but top out around $63,000 for joint filers with three or more children.

Estimated Tax Payments

If you’re self-employed, earning investment income, or not having enough withheld from paychecks, estimated payments are key.

Quarterly deadlines—April, June, September, January—require paying:

  • 90% of your current year’s total tax bill, or
  • 100% of last year’s tax bill (110% if your income is over $150,000).

Federal income tax can be complex, but knowing how the brackets work, choosing the right deductions and credits, understanding threshold limits, and staying current with payments helps you keep your hard-earned money right where it belongs.

By /Published On: August 12, 2025/