In case you missed it, Congress recently passed a bill that brings significant tax changes and updates that could impact your personal financial planning strategy. Here are three of the provisions that our clients most want to know about:
1. SALT Cap Increase: Time to Dust Off Your Receipt Box
What Changed: The state and local tax (SALT) deduction cap has been raised from $10,000 to $40,000 starting in 2025, with the deduction phased out for taxpayers with modified adjusted gross income over $250,000 for single taxpayers and $500,000 for married couples.
Your Strategy: After nearly a decade of being unable to itemize deductions effectively, many taxpayers will find it beneficial to itemize now that they can include more of their state income and local property taxes as deductions. This means getting back into the habit of meticulously tracking all your deductible expenses.
Get back in the habit of documenting:
Cash donations in church offering plates (keep a log with dates and amounts)
Items donated to qualifying thrift stores and charitable organizations (photograph items and get receipts)
Mortgage interest, property taxes, and state income taxes
Medical expenses exceeding 7.5% of your adjusted gross income
The key is starting this tracking now rather than scrambling at year-end. Consider using a smartphone app or simple spreadsheet to log donations and expenses throughout the year to make tax time easier.
2. Tax Rates Made Permanent: Your Roth Conversions Were Still Smart
What Changed: The legislation makes the current individual tax rates permanent, preventing them from expiring (and going back up to 2016 levels) at the end of 2025 as originally scheduled.
Your Strategy: If you performed Roth conversions in recent years anticipating higher tax rates, don't second-guess yourself. These conversions were still excellent financial moves for several reasons:
Tax diversification: You now have both pre-tax and post-tax retirement accounts, giving you flexibility to manage your tax bracket in retirement
Estate planning benefits: Roth IRAs don't have required minimum distributions during your lifetime, and inherited Roth IRAs provide tax-free growth for your heirs
Future uncertainty: While rates are permanent now, tax laws can always change again. Having already converted some assets protects you from potential future rate increases
Bracket management: The conversions may have kept you in lower tax brackets during high-income years, and the permanent rates ensure you won't face a sudden spike
The permanence of current rates actually makes future Roth conversion planning more predictable, not less valuable.
3. 529 Plan Expansion: More Ways to Use Education Savings
What Changed: The expenses that qualify for tax-free 529 distributions have been significantly expanded. Beyond traditional higher education expenses, 529 plans now cover a broader range of K-12 expenses including curriculum and curricular materials, books, instructional materials, online education materials, tutoring and education classes outside of the home, fees for specified tests, and qualified expenses for trade schools and vocational training programs.
Your Strategy: 529 plans just became significantly more flexible for K-12 education expenses. This expansion means you can now use 529 funds for:
Curriculum and instructional materials for homeschooling
Online education platforms and courses
Private tutoring services (conducted outside the home)
Standardized test fees (SAT, ACT, AP exams)
Educational software and apps
Trade school and vocational training program expenses
If you have children in K-12 education or family members considering trade school or vocational training, consider increasing your 529 contributions to take advantage of these expanded uses. For parents who were hesitant about 529 plans due to their previous restrictions, this expansion makes them much more practical for families with diverse educational needs and career paths.
Next Steps
Review your current financial plan in light of these changes. The increased SALT cap might make itemizing worthwhile again, the permanent tax rates provide planning certainty, and the 529 expansion creates new opportunities for education funding strategies.
Let us know if we can help you to evaluate how these changes (or any others – you can find a comprehensive review of all the tax changes in this article) specifically impact your situation and identify any adjustments needed for the remainder of 2025 and beyond.