Tag Archive for: new year

New Year, New Tax Considerations: What You Need to Know Before Filing Your 2025 Taxes

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Filing your tax return may feel routine. But the devil is in the details, as they say, and those details have a pesky habit of shifting from year to year. The 2025 tax year is a good example: Rule changes this year include both incremental adjustments and larger shifts stemming from the One Big Beautiful Bill Act (OBBBA), passed in July. Understanding these changes now can help you maximize deductions, spot planning opportunities and avoid surprises when you file.

A Boost for Traditional Deductions

The OBBBA made several taxpayer-friendly provisions permanent, starting with a higher standard deduction. For 2025, the standard deduction rises to $15,750 for single filers, up from $15,000 in 2024. For married couples filing jointly, the deduction increases to $31,500, up from $30,000.

The legislation also expanded the Child Tax Credit, raising it to $2,200 per qualifying child, compared with $2,000 under prior law.

Brand New Tax Deductions

The OBBBA introduced several new deductions to be on the lookout for: 

  • Personal deduction for seniors: If you were born before Jan. 2, 1961, you can take a $6,000 deduction ($12,000 if married filing jointly) in addition to your standard or itemized deduction. This deduction is phased out if your modified adjusted gross income (MAGI) is between $75,000 ($150,000 for joint filers) and $175,000 ($250,000 for joint filers). 
  • Tax deduction for tips and overtime pay: The Trump administration has described these provisions as “no tax” on tips and overtime, but that framing oversimplifies how the new code works. In practice, there is now a deduction for voluntary cash or charged tips earned in industries where tipping is customary. From 2025 through 2028, eligible single filers can deduct up to $25,000 in tipped income, though the deduction begins to phase out for individuals with MAGI above $150,000.

    A similar deduction applies to a portion of qualified overtime pay from 2025 through 2028. In most cases, this refers only to the premium portion of overtime—for example, the extra “half” in “time-and-a-half” pay—rather than the worker’s full hourly wage. For single filers, the deduction is capped at $12,500 of eligible compensation for those with MAGI below $150,000. The deduction is phased out above that amount and is zeroed out once above $275,000.
  • Car loan interest deduction: If you financed the purchase of a new vehicle in 2025, you may be eligible to deduct up to $10,000 in interest paid on that loan. But here’s the fine print: The vehicle must be for personal use, and it must have been built in the United States. To determine if your car fits the bill, look at your vehicle identification number (VIN). Cars built in the United States will have a VIN that starts with a 1, 4 or 5. The cap also phases out for single filers with MAGI above $100,000.

    In future years, lenders will be required to report auto loan interest payments directly to both taxpayers and the IRS. For this year, you may need to do a little digging through your loan statements, or you can request a summary of interest paid from your lender.

Gift and Estate Tax Exemptions

The OBBBA gave some much-needed clarity to a crucial estate planning rule. The lifetime estate and gift tax exemption was previously scheduled to sunset at the end of the year, which would have reduced the exemption from nearly $14 million to about $6 million. Instead, the higher exemption has been made permanent. Here’s where things stand now:

  • The estate and gift tax exemption is $13.99 million for 2025 and is scheduled to rise to $15 million in 2026.
  • The annual gift tax exclusion is $19,000 per recipient in 2025 and will remain at that level in 2026.

While it’s too late to make a tax-free gift for 2025, now is a good time to begin planning gifting strategies for 2026.

Tax Reporting on Cryptocurrency 

Beginning in 2025, the IRS now requires that crypto transactions are reported. If you sold or exchanged digital assets on a platform such as Coinbase, you should receive a Form 1099-DA. a new tax form created specifically for digital assets. Capital gains taxes may apply to crypto sales and trades. It’s also worth noting that digital currencies may be taxed as ordinary income if you receive them as payment.

It’s Not Too Late to Fund Your IRA

Your window for 2025 401(k) contributions closed at the end of the year. But if you want to pad your traditional or Roth IRA with 2025 contributions, you can do so up until the April 15 filing deadline. The contribution limit for IRAs is $7,000, but you can save an additional $1,000 if you’re 50 or older.

Planning Ahead Matters 

The impact of these changes depends on your income, filing status and long-term goals. Take time now to review your situation, gather the right documentation and coordinate tax decisions with your broader financial plan to make most of the current rules. And if you have any questions, we’re here to help bring clarity and confidence as you head into the filing season.

Ernest Jones, CPA

Director of Tax, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

This is for informational purposes only and is not meant to be construed as tax advice. Please consult your accountant for advice or to review any recommendation herein. The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Five Behavioral Finance Resolutions for a Better Financial Year

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As the old year draws to a close and a new one begins, millions of Americans will once again make New Year’s resolutions. For many, these resolutions focus on health or wealth, and when it comes to financial resolutions, the usual suspects tend to surface: spend less, save more and pay down debt.

These are, of course, worthwhile goals. But this year, consider adding another set of resolutions that go beyond budgeting and focus on the behavioral tendencies that shape—and sometimes sabotage—financial decision-making. In the year ahead, consider the following behavioral resolutions to help you make sound financial choices.

Dial Down Your Emotions

Emotions often move faster than logic. They can override rational thinking and push you toward decisions that may feel good in the moment but undermine long-term financial health. This year, resolve to take emotion out of investing. 

Separating feelings from financial choices can help you sidestep several potentially damaging behavioral biases, including loss aversion. This is the tendency for investors to fear losses more than they value gains. This bias can lead to panic selling in volatile markets, potentially causing you to lock in losses and miss market rebounds. Alternatively, it could cause you to hold onto losing positions far too long, making you unwilling to cut your losses even when it is financially beneficial to do so. 

Emotional investing can also fuel home bias, the instinct to stick with what’s familiar to you. Maybe that’s a certain company or an industry you know well. Or maybe it’s focusing on U.S. stocks to the exclusion of shares of international companies. Instead, practice viewing your investments not as extensions of your preferences or identity, but simply as the tools that are helping you reach your long-term objectives. 

Get a Second Opinion

Every once in a while, you may be tempted to alter your long-term financial plan. Before pulling the trigger, it pays to seek a second opinion. Expert counsel can help rein in a pair of common behavioral biases: overconfidence and confirmation bias. 

Overconfidence bias is the tendency for investors to believe they know more than they do or can predict outcomes with greater accuracy than is likely possible. The danger here is it might lead to risky behaviors like trying to time the market or going big on what they think is a can’t-miss investment opportunity. 

Meanwhile, confirmation bias is the tendency to seek out only information that supports existing beliefs. This can land you in an echo chamber where it’s hard to tell whether an investment decision is a good idea or not. 

Seeking outside advice helps you pressure-test ideas, reveal assumptions you may have missed and move forward with greater clarity.

Keep an Open Mind

Financial markets evolve constantly. Rigid thinking increases the risk of missing potential opportunities or holding onto investments that are no longer serving you.

Keeping an open mind helps you stay adaptable and able to reevaluate long-held assumptions and adjust when new information emerges. This helps counter status quo bias, the impulse to stick with the current situation purely because it’s familiar and what’s already happening. It also helps avoid anchoring, the tendency to rely too heavily on the first piece of information encountered. For example, investors might anchor to the original price of a stock, using it as a benchmark for future decisions—such as when to buy and sell—rather than focusing on other, more relevant information.

Look at Things From Different Angles

How information is presented can dramatically shift how we interpret it. The same facts can feel very different depending on how they’re presented. Marketers, pundits and headline writers understand this well; it’s one of the ways they can make news seem sensational.

But before accepting something as true, especially in finance, it’s useful to examine it from multiple angles. Seek out contrarian viewpoints, reframe the story and ask yourself what the opposite case might look like.

This approach helps guard against framing bias, where decisions are influenced by how information is presented rather than what the information actually says. For example, a fund described as having a “5% chance of loss” might feel riskier than one described as having a “95% chance of success,” even though both statements describe the same probability.

Stepping back, asking questions and challenging your first interpretation can lead to better, more balanced decisions.

Start a Media Diet

Today’s information ecosystem is noisy, fragmented and optimized to snag your attention. Headlines are crafted to provoke emotion, and social media feeds tend to amplify the sensational. 

A media diet can help restore balance. You don’t have to disengage entirely, but you may want to limit exposure to influencers offering unvetted advice, sticking instead to outlets with strong editorial standards. Part of a healthy media diet also involves resisting the urge to check the market every day. Your long-term strategy doesn’t require play-by-play updates.

A healthier personal media environment helps curb availability bias, where recent or highly publicized events distort your perception of risk. It also combats recency bias, which leads investors to overweight the latest market movements. And by lowering exposure to trending narratives, it limits the pull of herding—the impulse to follow the crowd, chasing whatever big name is dominating the week’s headlines.

Mastering Your Mindset

Good financial decision-making is largely about controlling behavioral impulses. Being more deliberate about how you think—less emotional, more open-minded and more balanced in how you consume information—can put you in a better position to stay focused on what truly matters: your long-term goals and the plan designed to help you meet them. 

If you ever have any questions or want to talk more about how to put these principles into practice, reach out, and we’d be happy to talk. 

Veronica Cabral

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Your Year-End Financial Planning Checklist

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As the year draws to a close, it’s the perfect time to review your financial situation and set yourself up for a strong start in the new year. Year-end financial planning can help you optimize your tax situation, review your investment performance, and make sure you’re on track to meet your long-term goals.

Here’s a checklist to guide you through the process:

1. Maximize Your Retirement Contributions:

  • 401(k) or 403(b): If you haven’t already, now is the time to max out your employer-sponsored retirement plan. For 2025, the contribution limit is $23,500, with an additional $7,500 catch-up contribution for those age 50 and over. For those aged 60 to 63, you can contribute up to $11,250 as a “super catch-up”, for a total of $34,750.
  • IRA: Contribute to your traditional or Roth IRA. The 2025 limit is $7,000, with a $1,000 catch-up contribution for those age 50 and over. Remember, you have until the tax-filing deadline in April 2026 to make these contributions. 
  • Solo 401(k) or SEP IRA: If you’re a small business owner or self-employed, consider making contributions to these plans to reduce your taxable income.

2. Review Your Investment Portfolio:

  • Rebalance: Check your asset allocation to ensure it aligns with your risk tolerance and financial goals. If one asset class has significantly outperformed, you may need to sell some of it and buy into an underperforming one to get back to your target allocation.
  • Tax-Loss Harvesting: This is a strategy that involves selling investments at a loss to offset capital gains and up to $3,000 of ordinary income. This can be a great way to reduce your tax bill, but be mindful of the wash-sale rule. If you are a client of ours, we do this automatically.

3. Optimize Your Tax Situation:

  • Charitable Giving: Donations to qualified charities are tax-deductible. Consider making year-end contributions, or even donating appreciated stock to avoid capital gains tax.
  • Flexible Spending Account (FSA): Use up the funds in your FSA before the year-end deadline. You could lose any money left in the account.
  • Health Savings Account (HSA): If you have an HSA, you can contribute up to $4,300 for an individual or $8,550 for a family in 2025. HSAs offer a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
  • Deductible Expenses: Gather receipts and documentation for potential tax deductions, such as property taxes, mortgage interest, and medical expenses.

4. Review Your Estate Plan:

  • Wills and Trusts: Ensure your will and trust documents are up to date and reflect your current wishes.
  • Beneficiaries: Check the beneficiary designations on your retirement accounts, life insurance policies, and annuities. These designations supersede your will, so it’s crucial to make sure they’re accurate.
  • Power of Attorney: Confirm that you have a durable power of attorney and a healthcare proxy in place.

5. Look Ahead to the New Year:

  • Budget Review: Analyze your spending from the past year to identify areas where you can save more.
  • Financial Goals: Revisit your short-term and long-term financial goals and make a plan to achieve them.
  • Meet with Your Financial Advisor: A comprehensive year-end review is the perfect opportunity to discuss your progress and make any necessary adjustments with your financial advisor.

By taking the time to review these key areas, you’ll not only gain a clearer picture of your current financial health but also lay the groundwork for a successful and prosperous new year.

Veronica Cabral

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.