Key Income Levels to Watch for Tax Planning in 2025

As the end of 2025 approaches, tax planning has become more important than ever. The recently passed BBB tax bill introduced several sweeping changes to the tax code, many of which directly affect families, high earners, and retirees. With so many provisions to sort through, it’s easy to feel overwhelmed. That’s why it helps to focus on three critical income levels that can have a major impact on your financial plan in 2025 and beyond.  

1. Families with Children – The $400,000 Threshold

One of the most widely discussed updates in the new tax bill is the expansion of the Child Tax Credit (CTC) to $2,200 per child. This credit provides a dollar-for-dollar reduction in your tax liability, making it a powerful benefit for families.

The key income level to keep in mind here is $400,000 of modified adjusted gross income (MAGI) for married couples. Once household income rises above this threshold, the child tax credit begins to phase out until it eventually disappears.

Why it matters: Families near this threshold may want to explore income planning strategies—to help keep taxable income below the cutoff and maximize the credit.

2. High Earners and State Tax Deductions – The $500,000 to $600,000 Range

The BBB tax bill also made significant changes for taxpayers who itemize deductions, particularly in areas with higher state and local taxes (SALT). The allowable deduction has been expanded from the old $10,000 cap to $40,000.

However, there’s a catch: for married couples with income above $500,000, the expanded deduction begins to phase out. By the time income reaches $600,000, the deduction drops back to the prior $10,000 limit.

Why it matters: High earners in regions with substantial state and property taxes—like the DC metro area and Northern Virginia—should pay close attention to their income projections. Planning around this phase-out could help preserve valuable deductions and reduce overall tax liability.

3. Retirees and the New Deduction – The $150,000 to $250,000 Range

Retirees also benefit from new provisions. The bill introduced an additional $6,000 deduction for each taxpayer over age 65. For a married couple where both spouses qualify, that’s a $12,000 deduction—a meaningful reduction in taxable income.

Still, income plays an important role. For married couples, the deduction begins to phase out once income exceeds $150,000, and it is fully phased out at $250,000.

Why it matters: Retirees managing withdrawals from retirement accounts, pensions, and other sources of income should carefully monitor their income levels. Smart planning could help maximize the new deduction and lower taxable income during retirement.

Final Thoughts

Tax planning is always important, but with the new changes taking effect in 2025, being mindful of key income thresholds is essential. Whether you’re a family with children, a high earner with significant state and local taxes, or a retiree hoping to make the most of new deductions, knowing where your income falls can make a real difference.

Every dollar you save in taxes is a dollar you can put toward investing, retirement, or meaningful personal goals. If you’d like to explore strategies tailored to your unique situation, don’t hesitate to reach out—we’d be glad to help you strengthen your financial plan for the years ahead.

SIGN UP TO RECEIVE GUIDEPOINT: NEWS THAT MATTERS BY E-MAIL

Click to Join our Newsletter

GuidePoint Financial Planning - A Reston Virginia Financial Advisor

Ryan Phillips, CFA, CFP® is the founder of GuidePoint Financial Planning. He is passionate about helping busy families plan, save, and invest for their financial future. Contact him today if you are interested in learning more about the benefits of working with a fee-only (no-commission) financial planner.

All material above is for educational purposes only and is no way a recommendation to buy or sell investment securities. You should always review investment and financial changes with qualified professionals. The data referenced is very short-term in nature and is used for educational means.