As the election approaches, discussions regarding tax modifications and changes to the tax law have increased. But before the election, the IRS has already announced some new IRS regulations which will begin in 2025. As clients prepare their end-of-the-year financial data for their 2024 taxes, it is also a good time to start adjusting for 2025. Consideration should also be given to couples who are separating or selling their assets in anticipation of divorce.
The 2025 annual income thresholds increased by about 2.8%. For example, if you are married and filing a joint income tax return, and your income was between $201,051 – $383,900 your tax rate in 2024 is 24%. The 24% tax rate will now apply to income thresholds between $206,701-$394,600. The standard deduction in 2025 will also increase to $30,000 for married couples filing jointly. Most filers will benefit from the increased standard deduction which eliminates the need to itemize deductions. Until a final decree in divorce is entered, parties should still consider filing a joint income tax return to maximize their tax savings.
Capital gains taxes, which are incurred from the sale of an asset such as a home or stocks, also have new thresholds for 2025. In 2025 married couples who earn between $96,700 to $600,050 will pay a 15% capital gains tax while those earning more income will pay 20% in capital gains. Consideration for capital gains taxes must be considered in dividing property including rental properties, vacation homes, stocks and other assets. Knowing the percentage of capital gains that will be due from the sale of an asset will allow the parties to negotiate proper values for assets, hold monies in escrow due for taxes, and hold both parties responsible for taxes post-divorce.
Finally, anyone may gift the sum of $19,000 annually tax-free to another individual in 2025. Gifting permits parents and other parties to make payments to a college fund for the children without incurring taxable consequences.
All of these useful tips should be reviewed in preparation for your separation or divorce so as to maximize the income between you and your spouse both during and after the divorce.
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