2025 Tax Updates — Key Changes for Estate & Retirement Planning

2025 Tax Updates — Key Changes for Estate & Retirement Planning

The 2025 tax year brings a unique convergence of changes: inflation-adjusted income brackets,rising standard deductions, modified estate and gift exemptions, and new retirement distribution rules.
This post highlights how these updates affect estate, gift, and retirement planning for individuals — with actionable tips to align your strategy before several provisions sunset in 2026.

1) Key 2025 Numbers at a Glance

• Standard Deduction (2025) — Single $15,750 | Head of Household $23,625 | Married Joint $31,500 (OBBBA adjustment).
  With most filers taking the standard deduction, itemized strategies like charitable bunching or prepaying medical expenses have become more selective tools for high-income taxpayers.
• Capital Gain Rates — 0% / 15% / 20% structure unchanged.
  The 15% threshold tops out around $518,900 (Single) and $583,750 (MFJ) after inflation adjustment.
• Annual Gift Exclusion (2025) — $19,000 per donor per recipient; married couples may gift $38,000 jointly without using lifetime credit.
• Unified Estate & Gift Tax Exemption (2025) — about $13.99 million per person, scheduled to drop by half after 2025 when the TCJA provisions sunset.
• RMD Age — 73 under SECURE 2.0 (gradually rising to 75 in 2033). The first RMD may be delayed until April 1 of the following year.

2) Estate & Gift Tax Updates — Exemption, Portability & Timing

The temporary doubling of the federal estate and gift exemption under the TCJA remains in place for 2025. However, its sunset in 2026 creates a “use-it-or-lose-it” window for high-net-worth families. Couples can also transfer unused exemptions through portability (DSUE) by timely filing Form 706. Strategic actions this year include:

• Accelerating Lifetime Transfers: Use spousal trusts (SLATs), GRATs, QPRTs, and ILITs to lock in the current $13.99M credit before it shrinks.
• Claim Portability Promptly: The surviving spouse must file Form 706 even when no tax is due to preserve the DSUE amount.
• Spread Annual Gifts: Gift to children or grandchildren each year to reduce future taxable estates and fund 529 plans or education trusts.

3) Retirement Rules — RMD and SECURE 2.0 Highlights

• RMD Timing: The first Required Minimum Distribution applies the year you turn 73 but may be delayed until April 1 of the next year. Deferring may cause two RMDs in one tax year, raising both tax and IRMAA exposure.
• Catch-Up Contributions (ages 60-63): Extra deferrals still allowed in 2025, but high-income W-2 earners will be required to make them as Roth catch-ups starting 2026.
• Roth Conversions: Useful when income drops temporarily or before the exemption shrinks. Qualified Charitable Distributions (QCDs) remain available for up to $100,000 per year, plus a one-time $50,000 split transfer.

4) Individual & Capital Gain Brackets (Summary)

The 2025 federal rates stay at seven brackets (10% to 37%), while the standard deduction rises again. Long-term capital gains and qualified dividends retain their preferential rates (0% / 15% / 20%).
Planning opportunities include harvesting losses, timing sales to stay within the 15% band, and donating appreciated assets to DAFs or charities for enhanced deductions.

5) Bonus Depreciation and Small Business Coordination

The bonus depreciation phase-down continues: 40% in 2025 (from 80% in 2023 and 60% in 2024).
Business owners should coordinate large purchases or equipment leases with personal tax timing — for example, electing Section 179 expensing or deferring income to optimize marginal rates.

6) Practical Checklist & Illustrations