The 2025 tax season may feel far off, but smart planning now can reduce stress and help you avoid costly mistakes. With changing tax laws, inflation adjustments, and increased scrutiny from the IRS, it’s more important than ever to be proactive about your tax obligations.

In this article, we’ll outline essential steps for preparing for the 2025 tax season. The strategies listed below can help you approach the tax season with confidence and clarity, no matter whether you’re filing as an individual or managing a small business.

Review 2024 changes to tax laws

Tax laws can change from year to year, and it’s critical to understand what adjustments may impact your 2025 tax return. For instance, inflation adjustments for the 2024 tax year will alter key thresholds like tax brackets, standard deductions, and contribution limits for retirement accounts.

According to the IRS, the standard deduction for 2024 will increase to $14,600 for single filers and $29,200 for married couples filing jointly, up from the 2023 levels.

One significant update is the change to the contribution limit for 401(k) accounts. In 2024, the contribution limit will rise to $23,000, allowing workers to save more for retirement while reducing their taxable income. Keeping track of these changes ensures you can optimize your deductions and reduce your overall tax liability.

Organize your documents early

One of the most common reasons for tax season stress is the last-minute scramble to gather documents. The key to a smooth tax filing process is organizing your paperwork well in advance. This includes collecting your W-2 forms, 1099s, interest statements, and any relevant receipts for deductions or credits you plan to claim.

It’s common for taxpayers to misplace important tax documents, which can lead to delays in filing. For small business owners, this is a pertinent issue, as the IRS has been increasingly focusing on businesses that underreport income. According to IRS Commissioner Danny Werfel, some U.S. millionaires are evading more than $150 billion annually.

Use software to track income and expenses throughout the year to avoid making mistakes.

Maximize your tax-deferred savings contributions

Another above-board way to reduce your taxable income is by contributing to tax-deferred accounts like a traditional IRA, 401(k), or Health Savings Account (HSA). In 2024, the IRS will allow individuals under 50 to contribute up to $6,500 to an IRA, with an additional $1,000 catch-up contribution for those aged 50 or older.

For HSAs, the contribution limit will increase to $4,150 for individuals and $8,300 for families.

Research from Fidelity shows that only about 36% of Americans max out their retirement contributions, meaning that many are missing out on valuable tax savings.

When you contribute up to the maximum allowed amount to these accounts, you can lower your adjusted gross income (AGI). Contributing to your retirement fund can also help you fall into a lower tax bracket, which can result in significant savings when you file your return.

Take advantage of available tax credits

Believe it or not, tax credits are one of the most effective ways to reduce your tax liability, as they directly offset the amount of tax you owe. In 2025, there are several credits to consider, including the Child Tax Credit, the Earned Income Tax Credit (EITC), and credits for education-related expenses.

In 2023, Congress extended several pandemic-era tax credits, and these are expected to continue in 2024. For example, the American Rescue Plan temporarily increased the Child Tax Credit to $3,600 per child under six and $3,000 per child aged six to 17.

While the credit has since reverted to pre-pandemic levels, it remains a crucial deduction for millions of American families. Recent data from the Center on Budget and Policy Priorities shows that these credits have helped to reduce child poverty rates by 46% since their introduction. These credits continue to have a significant impact on family finances.

Other credits, such as the Lifetime Learning Credit, can reduce the tax burden for students or those paying for higher education, covering up to $2,000 in qualified education expenses. Be sure to explore which credits apply to your situation to maximize your savings.

Estimate your tax liability early

A critical part of preparing for tax season is estimating your tax liability before filing. One easy way to prepare is to get a sense of how much you owe. Even knowing the general range can help you make any necessary adjustments—like making estimated quarterly payments or adjusting your withholdings—to avoid a large bill in April.

A 2023 study by the Government Accountability Office found that over 25% of taxpayers had to pay penalties due to underpayment of estimated taxes.

To avoid this, consider using an online tax calculator or consulting a tax professional like David’s Family CPA. They can help you estimate your income, deductions, and credits based on current tax laws and personal circumstances.

If you’re self-employed or have multiple streams of income, this step is even more essential. In the past year, the IRS has become particularly vigilant in ensuring that gig workers and freelancers pay their fair share of taxes.

You can avoid penalties and interest when you stay ahead of your tax liability. It also has the added benefit of making sure you are taking advantage of any deductions or credits available to you.

Gain the advantage by preparing for 2025 tax season

As tax season approaches, taking the time to plan ahead can save you both money and stress. When you review changes to tax laws, organize your documents, maximize savings contributions, and estimate your tax liability, you are engaging in all the essential steps to prepare yourself for the 2025 tax season.

With tax laws and thresholds shifting, being informed and proactive can help you reduce your taxable income and avoid surprises when it’s time to file. Remember, taking advantage of available tax credits and deductions can significantly lower your overall tax burden.

However, what you do with your 401k will depend on your financial goals and priorities. There is no one-size-fits all approach. David’s Family CPA can help you to study the costs and investment options in your specific 401(k) plan.