2025 Tax Update: What You Need to Know This Year

As we move through the 2025 tax year, several tax rules already in effect may impact how much you owe—and how much you can save. While 2025 doesn’t bring sweeping tax reform, inflation adjustments, restored incentives, and increased IRS reporting enforcement make this an important year for proactive tax planning rather than last-minute filing.

Here are the key 2025 tax updates every individual and business owner should be aware of.

Higher Tax Brackets & Standard Deduction

For 2025, the IRS adjusted income tax brackets and standard deduction amounts upward to reflect inflation. This means many taxpayers can earn slightly more income before moving into a higher tax bracket.

Why this matters:

• Marginal tax rates may apply at higher income thresholds

• Some taxpayers may see a lower effective tax rate

• The standard deduction remains beneficial for many filers

Planning opportunity:

This can be a good year to evaluate income timing strategies such as bonuses, stock option exercises, or Roth conversions.

Increased Retirement Contribution Limits

Retirement account contribution limits increased again in 2025, including:

• 401(k) and similar employer-sponsored plans

• Traditional and Roth IRAs

• Catch-up contributions for individuals age 50 and older

Planning opportunity:

Maximizing retirement contributions remains one of the most reliable and tax-efficient ways to reduce current-year taxable income.

Bonus Depreciation Restored to 100%

One of the most significant opportunities in 2025 is the return of 100% bonus depreciation for qualifying assets placed in service this year.

This is especially impactful for:

• Business owners purchasing equipment or vehicles

• Real estate investors using cost segregation

• Companies planning capital investments

Planning insight:

Proper timing and asset classification are critical. Without planning, this benefit can easily be underutilized or missed.

Increased IRS Reporting & Matching Enforcement

The IRS continues to expand third-party reporting and data matching, even without new legislation. Common forms include:

• Form 1099-K (payment platforms)

• Form 1099-NEC (contractors)

• Brokerage and cryptocurrency reporting

Important reminder:

You owe tax on net taxable income, not gross amounts—but the IRS expects all information returns to be properly reconciled on your tax return.

Cryptocurrency Reporting Remains Required

Cryptocurrency continues to be treated as taxable property in 2025. Taxable events include:

• Selling crypto

• Trading one cryptocurrency for another

• Using crypto for purchases

• Receiving crypto as income

Taxpayers may still choose allowable cost basis methods such as FIFO, LIFO, or specific identification to manage capital gains—but documentation is essential.

Final Takeaway

For 2025, the biggest tax risks aren’t dramatic new laws—they’re:

• Missed deductions

• Poor documentation

• Overstated income from reporting forms

• Failing to plan around available incentives

At LightUp Taxes, we help clients stay compliant, reduce tax liability, and take advantage of planning opportunities before filing season pressure begins. If you’d like help navigating the 2025 tax rules or want to ensure you’re maximizing available tax benefits, book a free discovery call to speak with one of our experienced CPAs. A short conversation now can save you time, money, and unnecessary stress later.