I have listed below what I believe to be the most pertinent tax and contribution changes in 2025.
The most notable changes above are the rather large increase in the social security wage base and the step up in catch-up contributions for 60-63 year olds. Everything else seems to be increasing as expected.
North Carolina has kept the promise of gradually decreasing their state income tax rate from 5.25% down to 3.99%.
Below, you can see how NC stands out from other states. Based on the statistics below, we are in the bottom third of state income taxes nationwide as of 2024 and are headed lower.
Below, you can see that after the TCJA (Tax Cuts and Jobs Act) sunsets, we may face tax increases across the board unless government powers adjust these numbers. This could mean there is an opportunity to complete Roth conversions before tax rates increase. Of course, this depends on your specific situation, and I recommend speaking with a CFP, CPA, or EA before completing any taxable money movements.
Another infographic below shows the income level you need before paying $1 of income tax based on family size. This doesn’t account for any deductible retirement account contributions or business deductions. There isn’t much planning around this information, but it is helpful to know when considering how much taxes you will owe with some back-of-the-napkin calculations.
These charts are all fairly interesting, but the question is, how can we plan to diminish our taxes as much as possible? For most W2 employees, the most common ten deductions I see are…
1. Retirement account contributions: 401k, 403b, SIMPLE IRA, SEP IRA, etc.
2. HSA contributions
3. Creative charitable giving strategies
4. Mortgage interest & property taxes
5. Tax loss harvesting
6. Child and dependent care credit
7. Child tax credit
8. Educational credits (American opportunity credit & lifetime learning credit)
9. Solar and EV credit
10. Energy-efficient home improvement credit
Different tax planning strategies regarding Roth conversions, 529 accounts, and real estate deductions are also available, but they have a more specific use case. As always, if you have any questions, shoot me an email.
Comments