If you’re nearing retirement, living on a fixed income, or focused on charitable giving, the 2025 tax law changes may affect you more than you realize. In Episode 111 of the Last Paycheck podcast, Archie Hoxton and advisor Emily Leslie explain what you need to know—and what to do now to prepare.
1. Overtime Deduction: A Win for Middle-Income Earners
If you’re working overtime to boost savings or pay off debt, there’s good news: from 2025 to 2028, up to $25,000 of overtime income will qualify for an above-the-line deduction. This benefit begins to phase out at $300,000 of household income (MFJ).
Action Step: If you expect to earn overtime in the coming years, adjust your tax planning to take advantage of this short-term window
2. The Senior Deduction: A Modest but Meaningful Break
While headlines claimed “No More Taxes on Social Security,” the reality is more nuanced. Instead of eliminating Social Security taxes, the new law introduces a $6,000 deduction for Americans age 65+ with income under $150,000 (MFJ). It’s available from 2025 to 2028 and doesn’t apply if you’ve already started benefits before age 65.
Who Benefits Most?
- Retirees aged 65+ with modest income
- Those delaying Social Security to full retirement age or beyond
3. Estate Tax Made (More) Predictable
For high-net-worth individuals and business owners, the estate tax threshold has been solidified. Now, individuals can pass on up to $15 million—and couples up to $30 million—without triggering estate tax liability. This change removes the previous uncertainty around sunset provisions.
If your estate is below that amount: No changes needed.
If it exceeds the threshold: Consider trusts, gifting strategies, or business succession plans.
4. SALT Deduction Expansion: Relief for High-Tax States
Taxpayers in states like New York, New Jersey, or California may benefit from the raised state and local tax (SALT) deduction cap—now $40,000 instead of $10,000. This provision begins phasing out at $500K income and reverts in 5 years.
Be cautious: Roth conversions or large IRA withdrawals could inadvertently push you over the $500K income limit, disqualifying you from the higher deduction.
5. Charitable Giving: More Options, More Rules
For donors, the new rules include:
- Above-the-line deduction: Up to $2,000 for charitable gifts without itemizing
- 0.5% AGI floor: You must give at least this amount before deductions kick in
- $1,700 SGO credit: Donations to Scholarship Granting Organizations (SGOs) offer a dollar-for-dollar reduction in your tax bill
Pro Tip: Combining these strategies may reduce your taxable income while supporting causes you care about.
Final Thought
Tax laws are always changing—but the next few years offer unique planning opportunities. Whether you’re still working, recently retired, or managing a large estate, it’s important to understand how these changes affect your financial picture.