A Closer Look at Your 2025 Opportunities

1.  Retirement contribution limits & deadlines

• IRA contribution limit for 2025: $7,000 (plus and additional $1,000 if age 50+). You may make these contributions for tax year 2025 through Apr 15, 2026.
• Consider your personal 401(k) situation and determine whether you have met or would like to meet your contribution limit. Check with your employer to receive more information on this.

2. Required Minimum Distributions (RMDs)

• If you are 73 years old or older you may have an RMD. Follow up with your retirement account manager (IRA, 401k, SIMPLE, SEP) to discuss whether you must take one to avoid a 30% penalty.

3. Qualified Charitable Distributions (QCDs) – One of Dan’s personal tax loopholes

• If taking an RMD, you may make a direct charitable donation (up to $100,000) from your retirement distribution to a qualifying 501(c)(3) organization (e.g. church, YMCA, etc.) that could effectively satisfy your Required Minimum Distribution (RMD) and reduce your taxable income.
• What does it mean to you?
  • Suppose you are 73 years old and must take a $10,000 RMD this year and plan on donating $10,000 to charity anyway. Instead of taking the distribution, paying tax on it, then donating (only to find out that your donation wasn’t used because you took the standard deduction), you can inform your retirement account overseer that you’d like to opt for a QCD and save yourself from being taxed on the $10,000 (or any amount lower).

4. Premium Tax Credit (Marketplace plans; AKA Obamacare) reconcile & year-end income planning

• The Premium Tax Credit (PTC) depends on final household income and must be reconciled on Form 8962 when you file. If your expected 2025 income will be different from what you used for advance credit estimates, year-end moves (retirement deferrals, timing of income) can materially change your PTC and the amount you must repay or receive.
• What does it mean to you?
  •  If you or family members are Marketplace enrollees, review your projected 2025 income with a health plan advisor to reduce reconciliation risk and avoid surprises at filing.

5. Business owners: Section 179, Bonus Depreciation & WOTC

• Section 179: current guidance for the 2025 tax year allows substantially higher Section 179 limits than pre-2025 years; so evaluate whether accelerating qualifying equipment purchases into the 2025 placed-in-service window makes sense for your business.
• Bonus depreciation: year-end placement in service and acquisition timing can change whether and how bonus depreciation applies; evaluate whether to place assets in service in 2025.
• The Work Opportunity Tax Credit (WOTC) is a federal incentive available through December 31, 2025, designed to encourage employers to hire individuals who face consistent barriers to employment. Employers may qualify for the credit when hiring workers from certain targeted groups, including long-term family assistance recipients, long-term unemployed individuals, SNAP or SSI recipients, TANF participants, qualified veterans (including disabled veterans), formerly incarcerated individuals, designated community residents, vocational rehabilitation referrals, and eligible summer youth employees.
  • To claim the credit, employers must obtain certification that the new hire belongs to a targeted group by submitting Form 8850 to their state workforce agency within 28 days of the employee’s start date.

6. Louisiana Tuition Donation Credit (TDC) Program

• What is it?
  • The TDC Program empowers Louisiana families with the financial resources to choose the school that will best prepare their children for their future careers. This program provides credits to Louisiana state taxpayers that donate to tax-exempt, not-for-profit organizations that provide scholarships to students in low-income families, also known as School Tuition Organizations (STOs).
• These organizations, specifically designated by the Louisiana Department of Education, offer up to 100% credit against state tax liability for donations supporting educational scholarships for K-12 students in Louisiana.
• Who is eligible?
  • Taxpayers filing a Louisiana income tax return in the year for which they donate are eligible.
• How much of a donor’s donation to the TDC Program is eligible for credit?
  • The portion attributed to funding student scholarships is eligible for a dollar-for-dollar tax credit. Some STOs designate 5% of donations for administrative costs, which are ineligible for credit, so it is important to refer to the organizations’ webpages for specific guidelines.
• How does a donor receive their tax credit?
  • After the Louisiana Department of Education verifies the amount of a qualifying donation, they will issue a receipt through the respective STO. It is imperative that the receipt is attached when filing their income tax return.
• Note that sole proprietorships, Limited Liability Companies (LLCs), Partnerships, S corporations, and C corporations may also claim the credit.

 
As always, if you have a need to pursue any of these tax opportunities, please call our office for further discussion.

Dan Johnson, CPA
832 E Boston St STE 15, Covington, LA 70433
(985) 893-4123
dan@danjohnsoncpa.com