Tax Planning: Key Strategies for 2025

Article details provided by David Theiss,CPA, CFP, VP, Senior Wealth Management Advisor and Financial Planner

As we prepare for another tax season, it’s important to review your tax planning strategies to maximize deductions and credits, avoid common mistakes, and ensure you're prepared for any changes in tax laws. David Theiss, CPA, CFP, VP, Senior Wealth Management Advisor, and Financial Planner at Croghan Colonial Bank, offers valuable advice on how individuals can optimize their tax strategy.

Understanding the Tax Code

"The tax code can seem complicated, but it’s really about understanding how it impacts your life and being proactive," David explains. While tax preparation may seem straightforward for the average taxpayer, truly effective tax planning requires a deeper understanding of your individual financial situation. For instance, there are tax credits for life events such as having children, home improvement, education, and retirement that taxpayers may not even be aware of. Dialogue with, and regular updates to, your tax advisor about changes in your life are key to successful tax planning.

Tax Planning vs. Tax Preparation

David stresses the importance of working with a financial planner who not only understands tax preparation but also offers strategic advice. "The difference between someone simply preparing your taxes and providing true tax planning is that a planner works to align your tax strategy with your long-term financial goals, while a tax preparer is focused more on recording your financial history." At Croghan Colonial Bank, David and his team focus more on holistic tax & financial planning throughout the year to ensure that their clients have the most favorable outcome when it’s time for tax season.

Considerations for Retirement Planning

For those nearing retirement, tax planning becomes even more critical. "Contributions to retirement accounts, such as IRAs and 401(k)s, can provide immediate tax relief as well as future tax benefits. It is also important to be strategic in how the assets in tax-advantaged accounts are invested. Generally speaking, the more aggressive part of an overall allocation should be placed in the most tax-advantaged accounts, and the slower-growth portion should be placed in the least tax-advantaged account." David refers to this as “right placing assets.” When David works with clients, he ensures that he is being strategic about taxes both in the short term and the long term.

Avoiding Common Tax Mistakes

One of the most common mistakes people make during tax season is overlooking deductions, credits, and other beneficial tax rules they're eligible for. David recommends reviewing your tax situation early to ensure you’re not leaving money on the table. One common mistake David sees is clients who are over the age of 70.5 and have charitable intent but do not give enough to itemize. In this situation, the client could make a Qualified Charitable Distribution (QCD). With a QCD, the funds go directly from their IRA to a charity, and the taxpayer will not have to recognize the income from the funds donated from the IRA. This is a fantastic strategy for implementing charitable intent without the burden of itemizing. "It's always a good idea to meet with a tax professional during tax season who knows your situation and can offer personalized advice."

Preparing for Future Tax Changes

It’s also crucial to be aware of upcoming changes in tax law. "The Tax Cuts and Jobs Act is set to sunset at the end of 2025 unless extended. This could lead to higher taxes for those in the top bracket, as the highest tax rate may increase from 37% to 39%," David explains. "Additionally, personal exemptions will return, and the standard deduction will be cut in half for many taxpayers." Though David observed that all the political pieces seem to be in place for the current tax code to be extended.

Tax Planning for the Long-Term

Effective tax planning is about more than just reducing your tax bill for the current year—it’s about creating a strategy that aligns with your long-term financial goals. "Tax planning should be a year-round activity," David emphasizes. "Regularly reviewing your tax strategy with a professional can help you make adjustments that will benefit your financial future."

For personalized advice and to discuss how to optimize your tax situation, reach out to one of our Croghan Wealth Management Advisors today.