Federal Income Tax Changes - For the 2025 Tax Year (Course Id 2454)

Each year, various limits affecting income tax preparation and planning change. Some changes commonly occur each year as a result of inflation indexing, while others occur because of new legislation or the sunsetting of existing law. This course will examine the tax changes affecting 2025 as a result of passage of the SECURE Act 2.0 and the inflation-changed limits effective for 2025 that are more significant from the perspective of an income tax preparer. Some context will be supplied, as appropriate, to assist readers in understanding the changes.

Please Note: This course covers tax issues applicable to 2024 income reported in the 2025 tax season.

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - Registered Tax Return Preparers - 2454

Course Learning Objectives

• List the 2025 changes in various amounts including the –
  o Standard mileage rates,
  o Standard deduction,
  o AMT exemption amount,
  o Limits related to income from U.S. Savings Bonds for taxpayers paying higher education expenses, and
  o Deductions for qualified long-term care insurance premiums;
• Identify the 2025 tax credit changes affecting the –
  o Saver’s credit,
  o Additional Child Tax Credit,
  o Earned income credit, and
  o Adoption credit;
• Recognize the 2025 changes affecting –
  o Health Savings Account (HSA) and Archer Medical Savings Accounts (MSA) requirements and contribution limits,
  o Roth IRA eligibility, and
  o Traditional IRA contribution deductibility for active participants in employer-sponsored qualified plans;
• List the changes effective for 2025 with respect to the –
  o Small employer premium tax credit, and
  o Applicable large employer mandate; and
• Determine the changes to retirement plans resulting from the Secure Act 2.0 that affect income tax preparation.

Chapter 1
Changes in Various Limits

• Identify the individual income tax rate changes affecting taxpayers;
• Calculate the standard mileage deductions for –
  o Use of a personal vehicle for business purposes,
  o Use of a personal vehicle to obtain medical care, and
  o Charitable use of a personal vehicle;
• Identify the 2025 standard deduction amounts available to taxpayers;
• Recognize the changes made to the alternative minimum tax exemption amount for 2025;
• Apply the tax-free United States savings bond income limits for taxpayers who paid qualified higher education expenses in 2025;
• Calculate the tax-deductible premiums for and tax-free benefits received under qualified long-term care insurance contracts;
• Determine the amount of assets that may be passed tax-free at death; and
• Identify the qualified business income (QBI) threshold amount.

Chapter 2
Tax Credit Changes

• Calculate the retirement savings contribution credit available to eligible taxpayers;
• Recognize the rules and income limits applicable to eligibility for the earned income credit; and
• Apply the adoption credit rules.

Chapter 3
PPACA-Related Tax Changes

• Health flexible spending arrangement contribution limits;
• Small business health care tax credit; and
• Large employer shared responsibility provision.

Chapter 4
Changes in Archer MSAs, HSAs & IRAs

• Recognize the eligibility rules applicable to Archer MSAs and HSAs;
• Calculate the maximum contributions that may be made to an Archer MSA;
• Apply the tax treatment rules to contributions to and distributions from Archer MSAs and HSAs;
• Calculate the traditional IRA tax deduction available to a taxpayer who is an active participant in an employer-sponsored retirement plan; and
• Recognize the MAGI limits that apply to a taxpayer’s eligibility to make a Roth IRA contribution.

Chapter 5
Secure Act 2.0

• Identifying the provisions designed to expand retirement plan coverage and increase retirement savings;
• Describing the provisions designed to enable plan participants to preserve their retirement income;
• Listing the provisions that simplify retirement plan rules; and
• Identifying those provisions designed to enhance federal revenue.

Course Learning Objectives

Introduction to the Course

Chapter 1 - Changes in Various Limits

Chapter Learning Objectives

Introduction

Individual Tax Rates

Standard Mileage Rates

Business Use of a Taxpayer’s Personal Vehicle

Personal Vehicle Use for Charitable Purposes

Use of a Taxpayer’s Personal Vehicle to Obtain Medical Care

Moving Expenses in Military Relocations

Standard Deduction Increased

Standard Deduction for Blind and Senior Taxpayers

Standard Deduction Eligibility

Alternative Minimum Tax (AMT)

Tax Preference Items Added Back to Produce Alternative Minimum Taxable Income

Alternative Minimum Tax Exemption Amount Increased

Education Savings Bond Program

Qualified Education Expenses

Eligible Educational Institutions

Qualified Education Expenses Reduced by Certain Tax-free Benefits Received

Figuring the Tax-Free Amount

Education Savings Bond Program Eligibility Subject to Income Limits/Filing Status

Determining Taxpayer’s Modified Adjusted Gross Income

Qualified Long-Term Care Insurance Premiums and Benefits

Favorable Benefits Tax Treatment Reserved for Chronically-Ill

Tax-Qualified Long Term Care Premiums Deductible within Limits

Tax-Qualified Long Term Care Insurance Benefits Tax-Free within Limits

Social Security Taxable Earnings Limit

Maximum Capital Gain/Dividend Tax Rate Increased for High-Income Taxpayers

Estate and Gift Tax Exemption

Section 199A Threshold Amount

Summary

Chapter Review

Chapter 2 - Tax Credit Changes

Chapter Learning Objectives

Introduction

Retirement Savings Contribution Credit

Saver’s Credit Applicable to Range of Retirement Contributions

Saver’s Credit Eligibility Based on Income and Filing Status

Earned Income Credit

EIC Rules Applicable to Everyone

Adjusted Gross Income Limits

Valid Social Security Number Required

Tax Filing Status

Citizenship or Residency

Foreign Earned Income

Investment Income

Earned Income

EIC Rules That Apply if Taxpayer Has a Qualifying Child

Relationship, Age, Residence and Joint Return Tests

Qualifying Child of More than One Person Rule

Taxpayer as the Qualifying Child of Another Taxpayer Rule

EIC Rules That Apply if Taxpayer Does Not Have a Qualifying Child

The Age Rule

The Dependent of Another Person Rule

The Qualifying Child of Another Taxpayer Rule

The Main Home Rule

Figuring the Amount of the Earned Income Credit

Adoption Credit/Exclusion

Eligible Child

Qualified Adoption Expenses

The Benefit

Timing of the Credit/Exclusion

Benefit Phased-Out at Higher Taxpayer MAGI

Summary

Chapter Review

Chapter 3 - PPACA-Related Tax Changes

Chapter Learning Objectives

Introduction

Summary of Existing PPACA-Related Tax Requirements

Health Flexible Spending Arrangement Contributions

Refundable Premium Tax Credit to Assist in Purchase of Qualified Health Plan

Eligibility for Credit

Federal Poverty Level

Qualified Health Plan

Amount of the Credit

Benchmark Plan

Taxpayer’s Expected Contribution

Calculating the Credit

Adjusted Monthly Premium

Special Rules Applicable to the Tax Credit

Reconciling Advance Premium Tax Credits

Small Business Premium Tax Credit

Eligibility Requirements

Limitations Affect Health Insurance Premium Credit

Full-Time Equivalent Employee (FTE) Limitation

Average Annual Wage Limitation

Average Premium Limitation

State Premium Subsidy and Tax Credit Limitation

Calculating the Credit

Large Employer Shared Responsibility: The Employer Mandate

Employers Not Offering Coverage

Employers Offering Coverage

Summary

Chapter Review

Chapter 4 - Changes in Archer MSAs, HSAs & IRAs

Chapter Learning Objectives

Introduction

Medical Savings Accounts

High Deductible Health Plan Requirement

Archer MSA Contributions

Penalty for Excess Contributions

Special Rules for Employer-Installed MSAs

Archer MSA Distributions

Archer MSA Rollovers

Account Transfer Incident to Divorce

Account Transfer at Death

Archer MSA Taxation

Contribution Tax Treatment

Distribution Tax Treatment

Archer MSA Distribution Tax Penalty

Health Savings Accounts

HSA Eligibility

HSA High Deductible Health Plan Requirement

HSA Contributions

HSA Contributions from Multiple Sources

Additional Contributions for Age 55 and Older Account Holders

First-Year Contributions for New Account Holders

Maximum HSA Contributions may be Reduced

Penalty for Excess Contributions

Employer HSA Participation

HSA Distributions

HSA Rollovers

Account Transfer Incident to Divorce

Account Transfer at Death

HSA Taxation

Contribution Tax Treatment

Distribution Tax Treatment

Tax-Free HSA Distributions

Taxable HSA Distributions

HSA Distribution Tax Penalty

Individual Retirement Accounts Affected by CARES Act

Early Distributions

Taxation of IRA Withdrawals Over Three-Year Period

Rollover of IRA Withdrawals Within Three Years of Distribution

Coronavirus-Related Distribution

Roth IRA Eligibility

Modified Adjusted Gross Income

Limits on Contributions

Traditional IRA Contributions by Active Participants

Tax Treatment of Contributions by Active Participants

Reduced Deductibility of Traditional IRA Contributions for Active Participants

Summary

Chapter Review

Chapter 5 - Secure Act 2.0

Chapter Learning Objectives

Introduction

SECURE Act 2.0 Provisions Effective in 2023

Tax Credits for Small Employer Plan Startup Costs Expanded

Tax Credits for Small Employers – Military Spouse Employment & Accelerated Plan Eligibility

Required Minimum Distribution (RMD) Age Change

Reducing Tax Penalties for RMD Insufficiencies

SEPs for Domestic Employees

Removing RMD Restrictions on Life Annuities

Penalty on Partial Annuitization

Compliance Resolution System (EPCRS) Expanded

Eliminating Premature Distribution Tax Penalty at Age 50 for Private Sector Firefighters

Repaying Qualified Birth or Adoption Distributions

Simplifying Hardship Distributions

Clarifying IRA Tax Penalty Statute of Limitations

Authorizing Retroactive Individual 401(k) Elective Deferrals for Sole Proprietors

Limiting Penalties for IRA Prohibited Transactions

Exempting Tax Penalties for Premature Distributions by Terminally Ill

Repealing the Direct Payment Requirement for Health and Long Term Care Insurance Premiums

Modifying the Premature Distribution Tax Penalty for Public Safety Officers

Providing Permanent Rules for Qualified Federally-Declared Disasters

Eliminating Additional Tax Penalties on IRA Excess Contribution Corrective Distributions

Modifying RMD Rules Applicable to Special Needs Trusts

Roth Contributions to SEPs & SIMPLEs Authorized

Roth Requirement for Catch-up Contributions

Employer may make Matching and Nonelective Roth Contributions

SECURE Act 2.0 Provisions Effective Beginning in 2024

Indexing of IRA Catch-up Limits

Emergency Expense Withdrawals

Additional SIMPLE Nonelective Contributions

SIMPLE Contribution Limits Increased

Starter 401(k) & 403(b) Plans Authorized

Transfer of Limited §529 funds to Roth IRAs

401(k) Replacement of SIMPLE IRAs

Former Plan Participant Involuntary Distribution Limit

Domestic Abuse Distributions

Clarifying the Substantially Equal Periodic Payments Rule

Lifetime Distribution Requirement for Designated Roth Accounts Eliminated

Surviving Spouse Distribution Options

403(b) Hardship Distribution Rules

Summary

Chapter Review

Appendix A

Glossary