Posted on

3 Best Ways to Maximize My Tax Return for 2025?

It is difficult to stay updated on state tax changes. The Tax Foundation states that 39 states will implement tax changes in 2025, including individual income tax cuts in nine states. Staying informed about these changes, especially if you reside in one of the affected states, can be crucial strategies for maximizing your tax return for 2025. 

For example, consider the impact of the Tax Cuts and Jobs Act (TCJA) expirations in 2025. The Tax Foundation emphasizes that policymakers will be navigating the expirations of certain provisions of the TCJA in 2025. A Tax Foundation calculator can help you understand how these expirations might affect your personal tax situation. This analysis could reveal potential areas to focus on to maximize your tax return.

3 Best Strategies to maximize your tax return for 2025:

Maximize retirement account contributions.

Retirement plans are a key area for tax deductions. The IRS offers various tax-advantaged retirement plans, and the sources list several types, including IRA accounts, Roth IRA accounts, and 401(k) rollover options. Maximizing contributions to these retirement accounts can lower your taxable income and increase your tax return. 

  • Contribute to traditional IRAs and 401(k)s up to allowed limits
  • For 2025, you can contribute up to $23,000 to a 401(k) if under age 50
  • If over 50, you can make additional catch-up contributions
  • Traditional IRA and 401(k) contributions reduce your taxable income dollar-for-dollar

To maximize your 2025 tax return through retirement account contributions, focus on fully funding both your employer-sponsored 401(k) and an Individual Retirement Account (IRA). The key is contributing pre-tax dollars, which directly reduces your taxable income. For 2025, you can contribute up to $23,000 to your 401(k), and if your employer offers matching retirement contributions, make sure to contribute at least enough to get the full match – this is essentially free money. Additionally, you can contribute $7,000 or less to a traditional IRA, and if you’re 50 or older, you can make extra catch-up contributions of $7,500 to your 401(k) and $1,000 to your IRA. These retirement contributions not only lower your taxable income dollar-for-dollar but also grow tax-deferred until retirement. For example, if you’re in the 24% tax bracket and contribute the full $23,000 to your 401(k), you could reduce your tax bill by $5,520. Remember that the ability to deduct traditional IRA retirement contributions may be limited if you or your spouse are covered by a retirement plan at work and your income exceeds certain levels, so consult with a tax professional about your situation.

maximize my tax return for 2025

Take Advantage of 2025 Tax Deductions and Tax Credits.

Utilize available 2025 tax deductions. The standard tax deductions for 2025, indicating that maximizing deductions is crucial. While specific deductions aren’t detailed, this highlights the importance of exploring all applicable deductions to reduce your taxable income.

Some 2025 Tax Strategies Can Be

  • Bundle multiple years of charitable donations into a single tax year
  • Keep records of business expenses if self-employed
  • Look into tax credits for energy-efficient home improvements
  • Consider contributing to an HSA (Health Savings Account) if you have a qualifying high-deductible health plan
  • Track education expenses for potential education credits

Optimize your filing status and timing of income/expenses

Consider the timing of major purchases or sales to optimize deductions. If married, calculate whether filing jointly or separately is more advantageous. Plan end-of-year income and deductions strategically. Keep detailed records of all potentially deductible expenses throughout the year.

Remember that tax laws can change, so you should verify with a free and dedicated RapidTax tax professional or the IRS website. Our dedicated tax professional can also help identify additional strategies based on your specific financial situation.

Posted on

Made an Error when Filing Tax in 2025 ?

Should you find error in your filing tax for the year 2025, there are various actions you can take to rectify the situation. In the event that you are able to correct the error and electronically resubmit your tax return, it is advisable to do so.

Should you find that you have omitted income or neglected to report key details, it is crucial to reach out to the IRS promptly and align with their calculations to prevent incurring penalties. On occasion, you might have to prepare an amended return by utilizing the federal form 1040-X. It is imperative to meticulously review your calculations and verify the accuracy of the information provided to prevent any setbacks or fines.

What are some of the Common Error When Filing Tax:

Exploring the Common Mistakes Encountered When Completing Tax Returns: Common Errors such as Math Calculations, Filing Status Mix-ups, Accuracy in Income Reporting, Deduction Mistakes, Eligibility for Credits, and Ensuring Correct Social Security Numbers.

Should you find errors on your tax return, consider submitting an Amended Return (Form 1040-X) to the IRS. This form allows you to rectify any inaccuracies related to your income, deductions, credits, or filing status within a three-year window from the initial filing date.

error filing tax

Prepare Tax Documents for Amending Error Made Filing Tax:

Should any necessary forms or schedules be associated with the mistake, like revised W-2s or 1099s in case the error pertains to income reporting, ensure they are enclosed. Additional documentation may be requested by the IRS for validation of the rectification.

Consider Electronic Filing for Amendments: In a shift seen in the past few years, the IRS now permits certain adjustments to tax returns to be electronically submitted, expediting the overall process. Take a moment to determine your eligibility for this option, especially for minor mistakes such as inaccurate income figures or missed deductions.

Tax Form 1040-X for Amending Individual Income Tax Return

When taxpayers have questions about what to do when errors are found in their tax filings, it is common for them to seek guidance. This could involve selecting the wrong tax filing status or receiving an extra 1099 form after filing.

In the event of a mistake made while claiming a tax credit, taxpayers may encounter an oversight. To rectify such errors, individuals have the option to submit an amended tax return using Tax Form 1040-X. This specific form acts as a substitute for the original tax filing.

Should adjustments be required to a tax return, the process is straightforward and easy to navigate. If your initial tax filing was done electronically, you can also make amendments electronically. Be sure to clearly detail the changes you are making and provide the updated financial information. Remember to include the original amounts, the total adjustment made, and the revised numbers in your submission. 

When adjustments are necessary for your tax return, it is crucial to be aware of the time frame allotted for making revisions. Generally, individuals are given a period of 3 years from the date of the original filing to make any necessary amendments. In the event of any errors on your tax return, it is recommended to take the initiative and file an amended return for significant revisions. This approach ensures the accuracy of your tax documentation and reduces the likelihood of facing challenges in the future, even though the IRS may address minor errors automatically.

If you find errors when filing tax returns and need to make amendments, RapidTax, an external tax preparation service, is available to help. Utilize RapidTax to electronically efile amended tax returns for the years 2021, 2022, and 2023.

Please be aware that the materials mainly center around general tax details and revisions for the year 2025. They do not offer detailed guidance on rectifying mistakes in your tax filings, apart from referencing Tax Form 1040-X and the possibility of amending your return.

For personalized guidance on resolving your specific filing error, it is advisable to seek advice from a dedicated Tax Professional at RapidTax, free of charge.

Posted on

New Changes on Tax Return in 2025

The landscape of tax regulations is ever-shifting. Significant modifications are on the horizon for the upcoming tax year in 2024 when filing tax return in 2025. Notable adjustments, such as revisions to the standard deduction and tax brackets, will introduce fresh limits and thresholds. These modifications are set to impact income generated in 2025, ultimately reflecting on tax filings for the year 2026. 

Major Changes For Filing the 2024 Tax Return in 2025

A variety of tax incentives are available to those interested in acquiring eco-friendly vehicles. These incentives include tax credits for the acquisition of plug-in electric and fuel-cell vehicles. These credits encompass a new clean vehicle credit, a pre-owned clean vehicle credit, and a commercial clean vehicle credit, each with specific criteria and credit thresholds.

In the upcoming tax year of 2024, there are notable adjustments to be aware of regarding tax credits that were initially implemented in 2023. A fresh feature introduced for the year ahead allows individuals to exchange these credits with the dealer for a purchase made in 2024 and necessitates the inclusion of extra details in the reporting process.

When it comes to credit transferability within green energy incentives, some tax credits are transferrable for monetary value. An excellent illustration is the credit for alternative fuel refueling property, which involves setting up charging stations and then selling the credit to gain immediate cash. The IRS FAQs provide clarity on the necessary steps to facilitate these transfers.

In the event that pass-through entity owners incur losses in the year 2024, they potentially qualify for a deduction known as a net operating loss (NOL) when filing their individual tax return. A recently introduced tax form, Tax Form 172, specifically for Net Operating Losses (NOLs), has been created to accommodate this situation.

tax return 2025

Adjustments for Inflation for Tax Return in 2025

Each year, the IRS makes various adjustments to tax items to account for inflation. One notable change is the adjustment of tax brackets for individuals, which directly influences the amount owners of pass-through entities contribute towards their share of business income.

Some other items affecting businesses due to cost of living adjustments (COLAs) include:

Standard Mileage Rate From Driving for Business.

Exploring the impact of the cost of living adjustments (COLAs) on businesses reveals a variety of factors, one of which is the Standard mileage rate for business driving. In the absence of deducting actual expenses, the rate set by the IRS amounts to 67¢ per mile for the year 2024.

Health Insurance Credit for Small Businesses and Employers.

Within the realm of business impacts related to cost of living adjustments (COLAs), another noteworthy factor to consider is the Small employer’s health insurance credit. This credit’s eligibility criteria, which takes wage levels into account, has recently been updated to reflect inflation rates for the year 2024.

Gross Receipts when Filing Tax Return in 2025

Test for annual gross receipts. A crucial assessment to determine a business’s eligibility for employing the cash method of accounting, opting out of inventory accounting, and meeting other specific criteria. For the fiscal year 2024, the benchmark under the annual gross receipts test stands at an average of $30 million over the preceding three years.

First Year Expensing

Beginning in 2024, the Sec. 179 tax deduction offers businesses the opportunity to deduct the full cost of eligible property, such as machinery and equipment, when placed in service. This deduction allows for an immediate expensing of up to $1,220,000, with a reduction for purchases exceeding $3,050,000.

Retirement Plan Contributions.

In addition to the impact of cost of living adjustments (COLAs), there are several other factors that influence businesses, such as contributions to retirement plans. The limits for qualified retirement plan contributions have been raised for the year 2024.

Limitation on Losses for Non-Corporate Taxpayers.

Among the factors influencing businesses as a result of adjustments in the cost of living, there is the consideration of limitations on losses for non-corporate taxpayers. The current restriction on losses for the year has been raised, with any surplus losses being integrated into a net operating loss that may be utilized in upcoming years.

QBI (Qualified business income) Tax Deduction.

In addition to the cost of living adjustments (COLAs), businesses are impacted by various factors, such as the Qualified Business Income (QBI) tax deduction. For the tax year 2024, the threshold for taxable income at which the QBI deduction may be restricted or excluded has been raised.