New Year – What’s New in 2o25 Part 2
This blog addresses the allowable tax limits for annual gifts, QCD’s and transferring wealth to individuals or organizations in 2025. This is important information to know so you can plan your giving strategically. Our first blog was about 401(k) and IRA contribution information to know so you can make your payroll adjustments early. If you missed that blog, check out New Year – What’s New in 2025.
Gift Tax Annual and Lifetime Limits
In 2025 the gift tax limit will increase to $19,000 per person. In 2024 it was $18,000 per person. This is also referred to as the gift tax exclusion amount. It is the amount one can give to another person without having to report this transfer of money to the IRS. If you were to exceed this annual amount, it doesn’t mean you are subject to a gift tax – it simply means you are required to file IRS Form 709 to report the gift. This reported amount will then be subtracted from your lifetime gift tax exclusion. Keep in mind that a married couple can gift up to $38,000 to an individual in 2025.
For a detailed article on this and some illustrations on how it works, follow this link: Gift Tax: 2024-2025 Annual and Lifetime Limits – NerdWallet
Estate Tax Credit
Individuals receiving an inheritance in 2025 will be able to exclude $13,990,000 from federal taxation.
Qualified Charitable Donation (QCD’s) Amount
Another limit that was increased this year is the qualified charitable donation (QCD) amount. This is the amount that those age 70 1/2 or older are allowed to donate to 501(c)3 organizations directly from an IRA. The QCD will fulfill the required minimum distribution (RMD) amount for those over the age of 73 while reducing taxable income. If you have philanthropic goals and do not need the funds for living expenses, consider this gifting strategy. For 2025 one is allowed to gift up to $108,000 to qualified charitable organizations. In 2024 it was $105,000.
To learn more about using this strategy to reduce your tax liability read Reducing RMDs With QCDs in 2025 | Charles Schwab
Tax Bracket and Standard Deduction Adjustments
In October 2024 the IRS announced its inflation adjusted amounts for tax brackets and standard deductions based on the Consumer Price Index (CPI). This year there was a 2.8% increase in thresholds per bracket. U.S. taxes are progressive meaning earned income is taxed at different percentages. For a single filer, the first dollars earned up to $11,925 will be taxed at 10%, earnings between $11,926 and $48,475 will be taxed at $12%. Finally, any earned income greater than $48,475 but less than $103,350 in 2025 will be taxed at 22%. To see the detailed brackets for single filers, married filing jointly and heads of household refer to this article New Tax Brackets in 2025 Could Impact Your Paycheck—Here’s What to Expect.
It is also important to note that the standard deductions for all filing categories have been increased from 2024 levels. The standard deduction for single filers will be $15,000, married filing jointly will be $30,000 and for heads of households $22,500. With these expanded brackets for 2025 you may see a change in your take home pay. If this is the case, you may want to consider applying it towards your emergency fund or retirement accounts.
Start the New Year off right and review your financial planning for gifting and savings opportunities. At Wealth Planning Corporation we are here to simplify your financial complexities and guide individuals and families into and through retirement. If we can be of assistance, please do not hesitate to schedule a complimentary discovery meeting.
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This information is based on IRS releases and is for your reference only. Consult with your tax or financial professional before taking action.
