Tax Season: Double-Check for Overlooked Deductions
Personal finance experts urge filers to slow down and double-check their returns for overlooked deductions and credits, including Social Security benefits, IRA contributions, and new AI-related IRS processes. The guidance emphasizes reviewing filing deadlines and maximizing refunds while preventing costly mistakes. This comes as tax preparation becomes more complex with evolving crypto reporting requirements.
Inflation adjustments for the 2025 tax year have raised the standard deduction to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household. This increase shields more income from taxation before deductions are even itemized. For the first time, brokers are required to report digital asset transactions on a new Form 1099-DA for the 2025 tax year. This change, which covers cryptocurrencies, stablecoins, and NFTs, aims to standardize reporting and simplify how investors calculate and report gains and losses. Retirement savings limits have also climbed. The maximum employee contribution to a 401(k) plan has increased to $23,500. The IRA contribution limit remains at $7,000 for 2025, with an additional $1,000 catch-up allowed for those aged 50 and over. A significant legislative change quadrupled the cap on the state and local tax (SALT) deduction from $10,000 to $40,000 for 2025. This overhaul provides substantial relief for taxpayers in states with high property and income taxes, though the benefit begins to phase out for incomes over $500,000. The IRS is escalating its use of artificial intelligence to flag returns for audits, with dozens of AI projects now focused on enforcement. These systems analyze returns for discrepancies and patterns invisible to human auditors, specifically targeting high-risk areas like complex partnerships and high-wealth individuals. The IRS Direct File program, a free online tax filing tool that expanded to 25 states for the 2025 season, has been discontinued for the upcoming 2026 filing season. Citing high costs and low participation, the Treasury Department ended the program in late 2025, removing a filing option the IRS had previously announced would be made permanent. Other new deductions taking effect include breaks on up to $25,000 in tip income and on overtime pay for eligible workers. Additionally, a new "senior bonus" deduction allows those 65 and older to deduct an extra $6,000, though it is subject to income phase-outs.
