Dear Mirus Clients,
We hope you've had a wonderful summer filled with great weather, time with family and friends, and maybe a well-deserved vacation or two! As we head into the back stretch of 2025, we're excited to help you finish the year strongly with some important planning updates and opportunities. After highlighting the recent WA State legislative updates earlier this year, the recent passage of the One Big, Beautiful, Bill Act (OBBBA) has created changes to the federal tax landscape that will impact essentially all our clients in some capacity. We want to make sure you're aware of these new provisions as we approach year-end planning season!
Current Tax Rate Structure Extended
The seven individual ordinary income tax brackets (10%, 12%, 22%, 24%, 32%, 35% and 37%) are now “permanent”, avoiding a scheduled sunset that would have reverted tax rates to the higher pre-2018 levels. We use the term “permanent” because it is the language commonly used in the media; however, the tax code can always be revised in the future to whatever rates Congress agrees upon. These rates remain attractive for Roth conversions and other tax planning strategies if you believe that taxes will eventually go up. Those tax brackets for 2025 are as follows:
Tax Rate | Single Filers | Married Filing Jointly |
10% | $0 – $11,925 | $0 – $23,850 |
12% | $11,926 – $48,475 | $23,851 – $96,950 |
22% | $48,476 – $103,350 | $96,951 – $206,700 |
24% | $103,351 – $197,300 | $206,701 – $394,600 |
32% | $197,301 – $250,525 | $394,601 – $501,050 |
35% | $250,526 – $626,350 | $501,051 – $751,600 |
37% | $626,351+ | $751,601+ |
New Senior Tax Deduction
A major new provision provides a $6,000 bonus senior deduction for taxpayers aged 65 and older ($12,000 for married couples filing jointly if both spouses qualify). The bonus deduction is available to both those who itemize and those taking the standard deduction. This senior deduction is in addition to existing standard and age-based deductions too, potentially providing seniors with total standard deductions of up to $23,350 for single filers and $46,700 for joint filers. This new senior deduction is subject to the income phaseout levels noted below.
- Single filers: deduction phaseout begins at $75,000 Modified Adjusted Gross Income (MAGI), fully eliminated at $175,000 MAGI
- Joint filers: phaseout begins at $150,000 MAGI, fully eliminated at $250,000 MAGI
The phaseout is a $0.06 deduction for every $1 of income over the initial phaseout level. For example, a single filer with $100,000 income would see their $6,000 senior deduction reduced by $1,500 (calculated as: excess income of $25,000 × $.06 reduction rate), resulting in a $4,500 senior deduction instead of the full $6,000.
Important note: This provision expires December 31, 2028.
SALT Deduction Expansion
The state and local tax (SALT) deduction increases substantially from $10,000 to $40,000 for joint filers ($20,000 for single filers) from 2025-2029. The SALT deduction allows for federal itemized deductions for certain tax payments, such as state income taxes and property taxes. This deduction is subject to income phaseouts however, households with taxable income above $600k will be limited to the previous $10k SALT exemption level.
Estate Tax Exemption Increase
Beginning in 2026, the federal estate and gift tax exemption jumps to $15 million per individual ($30 million per couple), with annual inflation adjustments. This represents a significant increase from current levels and creates planning opportunities for high-net-worth families.
529 Plan Expansion
The Act significantly broadens 529 plan usage, allowing tax-free withdrawals up to $20,000 annually for K-12 expenses, including curriculum, textbooks, tutoring, educational therapies, and online resources. Post-secondary credentialing expenses for trade schools and certificate programs are also now qualified expenses.
Trump Savings Account
A new type of youth investment account, the Trump Savings Account, is being established as part of this bill. Children born from January 1, 2025, to December 31, 2028, receive a $1,000 “seed payment” from the U.S. Treasury. No income limit applies, but the child and at least one parent must have valid Social Security numbers. Parents may contribute up to $5,000 annually per child; employers may add up to $2,500.
Note: These accounts will not be available until July 2026.
Investments are restricted to low-cost index funds tracking major indices (e.g., S&P 500), with no distributions allowed before age 18. Contributions are not tax-deductible. The account beneficiary will receive full access to their account at age 18. There are no required minimum distributions.
Charitable Contribution Changes
Starting tax year 2026, tax filers using the standard deduction can still deduct up to $1,000 (single) or $2,000 (joint) for cash gifts to qualified charities.
For itemized tax filers, only charitable gifts exceeding 0.5% of AGI are deductible. For example, a couple with $400,000 AGI could only deduct charitable donations if they total over $2,000.
Additional Tax Relief- 2025-2028 only
No Tax on Tips: Service professionals (like servers, bartenders, stylists) can deduct up to $25,000 in cash tips per year from income, as long as their income is under $150,000 (single) or $300,000 (joint). The deduction phases out for higher earners and only applies to tips received in cash, by card, or digitally—not gifts or non-cash perks.
No Tax on Overtime: Workers can also deduct up to $12,500 (single) or $25,000 (joint) in overtime pay above their regular wage. The same income limits and phaseout rules apply.
Closing Words
As always, these legislative changes present opportunities as well as new complexities. Our team at Mirus will continue to monitor developments and work with you to craft strategies that optimize your family’s wealth, minimize unnecessary taxes, and ensure your legacy is protected in the face of ongoing legislative changes. Please reach out to us as you consider 2025 year-end planning or if you have questions about how these updates may affect your personal and family objectives.
Have a great Fall season!
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