From the battle against inflation to the election of a new administration and subsequent speculation about what it could mean for financial policy and regulation moving forward, the 2024 financial landscape has been dominated by uncertainty. And as the calendar flips to 2025, arguably no topic is more at center stage than taxes.

With numerous shifts in policy potentially set to be rung in over the course of the next 12 to 18 months, 2025 is set to become perhaps one of the most significant years in modern history when it comes to shaping the tax and financial planning environments over the short and medium term. Whether it’s the extended child tax credit or changes to the state and local tax deduction, numerous provisions hang in the balance and are set to elapse by the end of 2025. And with that, as we edge closer to this period of uncertainty, individuals are understandably eager to find ways to maximize their financial outlook as much as possible.

With that in mind, here are a few key and often overlooked items that individuals should keep in mind as they look ahead and prepare for the 2025 filing season and beyond.

Anticipate cuts to the estate tax and gift exemption

One of the most notable tax-related items that is “up in the air” as we head into 2025 is what will happen to the existing federal estate and gift tax exemption. Particularly impactful for high-net-worth individuals, this exemption allows individuals to pass on assets upon death or during their lifetime — from stock investments to real estate — to beneficiaries without paying federal estate or gift taxes. What makes this exemption even more appealing is that the threshold is set to jump from an existing all-time high of $13.6 million to $13.9 million on Jan. 1, 2025. However, this historic estate tax and gift exclusion is set to elapse on Jan. 1, 2026, and will fall to approximately $7 million if it isn’t extended by Congress. Moreover, navigating this exemption is notoriously complex, with individuals needing to take into consideration everything from the state they live in to the size of their net worth. Therefore, while there might be quiet optimism that the new administration and Congress will extend the exemption, individuals need to be proactive in taking steps to make the most of this exemption and guard against potentially missing out on millions in savings in the case that it does expire. 

Navigating IRA inheritance

In 2022, more than 40% of American households owned an individual retirement account. In addition, given there is no limit to the number of IRAs an individual can have, many households likely have several. This means not only a huge opportunity for beneficiaries to inherit but also leaves them with numerous stipulations that they need to navigate — namely when it comes to required minimum distributions, or the mandated amount that an individual must withdraw on a yearly basis. Most individuals are familiar with RMDs for their own IRA accounts. However, many do not realize they are also required to meet RMDs for inherited accounts as well, and because RMDs from traditional IRAs count toward the beneficiary’s taxable income, it’s imperative for these contingencies to be planned for in advance. What’s more, beneficiaries themselves are subjected to different criteria for managing their inherited IRAs. For example, many adult children who inherit IRAs must withdraw all funds from the account within 10 years of the account holder’s passing, while other beneficiaries such as spouses face different demands. These nuances result in a slew of potential avenues to maximize future management and tax efficiency opportunities, so individuals need to consult with their advisors as soon as possible to make sure they are optimizing their inherited IRAs.

Harvest your losses, sell losing stocks and reinvest

Loss harvesting — or selling off failing stocks where you have lost money — is one of the most powerful tax-saving tools for individuals, allowing them to use their investment losses to negate any taxable gains from strongly performing investments at a dollar-to-dollar ratio. In addition, if individuals have had a particularly bad investment year and have realized losses that exceed their gains, they can deduct up to $3,000 off their ordinary taxable income as well. Furthermore, individuals who have seen more than $3,000 in losses can roll the remaining losses over from year to year until completely written off to further reduce future tax burdens. From there, beyond just the tax benefits, individuals can parlay any returns from the sales of their losing stocks into investments in other better performing alternatives.

Reducing taxable income

Reducing your taxable income may seem like a “no brainer” when it comes to maximizing taxes; however, with so many different avenues available to filers, it isn’t uncommon for individuals to end up missing out on opportunities. For example, while many filers may be familiar with the tax benefits of 401(k) plans, they should know health savings accounts, 529 plans — which allow for tax-friendly savings for educational expenses — and traditional IRAs all allow filers to reap significant tax savings as well. These opportunities offering incredibly appealing contribution limits that can help individuals significantly reduce their taxable income:

• 401(k) plans: $23,000 ($31,000 if age 50 or older);
• Traditional IRAs: $7,000 ($8,000 if age 50 or older);
• 529 plans: $18,000 per person (or $36,000 for a married couple) per recipient without implicating gift tax (individual states set contribution limits);
• HSAs: $4,150 for self-only coverage and $8,300 for family coverage (those 55 and older can contribute an additional $1,000).

Looking ahead

Navigating tax season can feel like a Herculean effort, especially when so much uncertainty is on the horizon. However, by keeping these key items in mind, individuals can help mitigate headaches as much as possible and optimize their tax opportunities for years to come.

The ascendency of AI has come with it the ascendency of Chief AI Officers, with a number of prominent companies having hired or appointed one in the past few years. But for the companies not yet ready to fully commit to bringing one on full time, Chicago-based Sikich announced the launch of its new virtual Chief AI Officer service. 

The service aims to provide clients with executive-level AI guidance without the overhead of a full-time hire. Such a virtual CAIO would provide custom-tailored AI strategies aligned with business objectives, identifying high-impact AI use cases and creating forward-looking implementation plans. They would also provide recommendations for AI tools, platforms and vendors, including guidance on build-versus-buy scenarios and seamless technology integration, as well as assistance with ensuring AI initiatives meet ethical standards, regulatory requirements and organizational values, with guidance on data privacy and AI model fairness. The service will also serve to facilitate collaboration between IT, data and business teams so as to maximize AI initiative value; and providing assessment and real-time optimization of AI strategies to keep pace with technological advancements and changing business needs. The virtual CAIO service also offers an add-on specifically designed to support customers embarking on the successful deployment of Microsoft 365 Copilot. 

In an email, Ray Beste, principal AI strategist at Sikich and the lead on this service line, said it is comparable to the virtual CFO services provided at many firms. It is, in fact, a strategic extension of the firm’s existing virtual executive services like virtual Chief Information Officer and virtual Chief Information Security Officer. 

Photo: Matt Stout

“What makes the vCAIO unique is its focus on a highly specific and evolving area of business: AI strategy. While a traditional CIO or CISO focuses on broader IT or security concerns, the vCAIO is designed to help organizations navigate the unique challenges and opportunities AI presents,” he said. 

Beste said he will serve as the primary resource, fully dedicated to this role. Depending on client needs, he said, they will scale and resource accordingly, leveraging the firm’s in-house AI experts. This follows the same successful model they use for their vCISO and vCIO services, where they bring in the right specialists to deliver tailored solutions. 

The firm used its own experience implementing AI solutions—combined with insights from client engagements and conversations—to develop this service by identifying the intersection of AI-specific needs and traditional executive roles. Through this process, they further refined their idea of what makes for a quality CAIO. 

“It’s someone who understands both the big picture of where AI is going and the practical realities of applying it to business problems. This person must collaborate seamlessly with CIOs, CDOs, CTOs and CISOs because AI impacts budgets, data and security across all these roles. A great vCAIO combines business acumen, technical knowledge and the ability to work at all levels of an organization,” he said. 

Beste said that this new service is still built on a foundation of AI advisory work they’ve been doing for years, and added that this initiative was born because their clients expressed a need for ongoing partnership in this area. So far, he said, industries like life sciences, insurance and professional services are showing the most interest. These organizations often already have CIOs or CDOs but need someone to cut through the noise and help them prioritize the right AI investments. 

He also said that smaller companies might benefit from the vCAIO service as well. 

“Smaller companies with ambitious growth goals may also find this service valuable. They might not yet be ready to hire a full-time AI executive but recognize that expert guidance can help them scale faster. Ultimately, it’s about mindset and urgency rather than size, industry or geography,” he said. 

Sikich is currently in active discussions with several organizations interested in leveraging this service to accelerate their AI strategies.

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“The calm before the change” — that is how one industry source aptly described this year’s tax season as Donald Trump returns to the White House, Republicans take control of Congress, and tax professionals navigate an evolving, tech-driven landscape.

While it is unlikely that this tax season will be impacted by any significant changes, the same will likely not hold true as we head into 2026 and beyond. As a result, much of the focus for this season will be on proactive planning, as significant portions of the Tax Cuts and Jobs Act are set to expire at the end of 2025, if they are not extended.

“We don’t expect radical changes for this upcoming tax season or the tax season after that. The current tax laws are in place until the end of 2025. However, the return of the Trump administration to the White House signals that the current tax foundation will likely be renewed into 2026 and beyond, with some possible new provisions. This means that proactive tax planning continues to be essential for those desirous of saving as much as they can in taxes,” said Randy Hughes, CEO of Atlanta-based Counting Pennies and co-founder of Seven Figure Profits.

As noted in a recent Wolters Kluwer tax briefing: “The expectation is that tax legislation will ramp up in early 2025. With the GOP in control of the Senate and the House, Trump’s agenda will have a much easier path to legislative approval. Action on the soon-to-expire TCJA is likely to be high on the to-do list for the new Congress.”

That being said, many tax professionals will also find themselves navigating stricter reporting requirements, evolving tax laws, technological advancements, and staffing constraints.

Keeping pace with regulations, legislation

As the regulatory landscape continues to evolve, it will be important for tax professionals to stay up to speed on potential changes and effectively manage client expectations this tax season.

Said Hughes, “The most significant changes include potential new regulations around cryptocurrency transactions, increased IRS scrutiny on high earners, and adjustments to clean energy credits. Most changes will not be changes to tax law, but the implementation of laws that are already in place. So being familiar with this implementation is important.”

“For our clients, this means being vigilant about reporting accuracy, especially in emerging investment spaces,” Hughes continued. “Top of mind for us is ensuring clients are compliant while maximizing available credits and deductions, particularly for business owners leveraging green energy initiatives.”

The Treasury Department and the Internal Revenue Service, for instance, released in June 2024 final regulations on the Infrastructure Investment and Jobs Act reporting requirements for brokers of digital assets. As explained by the Treasury, this will “require brokers to report gross proceeds on the sale of digital assets beginning in 2026 for all sales in 2025. Brokers will be required to also report information on the tax basis for certain digital assets beginning in 2027 for sales in 2026.”

For transactions occurring in 2025, anyone who is considered a custodial digital asset broker must file the new Form 1099-DA to the IRS.

“The broker reporting of crypto transactions on the 1099-DA is going to start in 2025, so that has sort of postponed the concern a little. We won’t be seeing those forms until probably early 2026, but the other thing that is more of a concern for 2024 is the [Form] 1099-K,” said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax and Accounting.

In late November, the IRS announced transition relief for third-party settlement organizations regarding transactions during calendar years 2024 and 2025. Under the IRS guidance, TPSOs will be required to file Form 1099-K to report transactions when the amount of total payments for those transactions is more than $5,000 in calendar year 2024. This threshold will shift to more than $2,500 in calendar year 2025; and more than $600 in calendar year 2026 and after.

Furthermore, TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 1099-K, as well as Form 945, with the IRS. The tax service also stated that, for calendar year 2024, it will not assert penalties for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year. However, it will assert penalties for calendar year 2025 and after.

Luscombe also pointed to the likelihood of bipartisan disaster relief, which could potentially impact the tax season. “There’s a lot of bipartisan support for doing something on disaster relief. Congress has tended to do disaster relief on a piecemeal basis. … Now, with [Hurricanes] Helene and Milton, I think there’s probably going to be an effort at year-end to get through some disaster relief that could impact taxpayers for 2024,” he said.

When looking at new tax regulations or rule changes that could impact firms and their tax clients, Rema Serafi, vice chair of tax at KPMG, referred to what the Big Four firm calls the “Tax Policy Trifecta.”

“In 2025 and beyond, accounting firms — as well as other firms of all sizes — will continue to grapple with the Tax Policy Trifecta: the expiration of $4 trillion in tax cuts from the 2017 Tax Cuts and Jobs Act, the ongoing implementation of the Organisation for Economic Co-operation and Development’s global minimum tax and the future of the regime should the U.S. not comply, and a wave of regulatory changes, including changes introduced by the Inflation Reduction Act, the corporate alternative minimum tax and potential tariffs,” said Serafi. “These issues are top of mind for our firm and clients, as they’ll impact both businesses and individual taxpayers. The expiration of the TCJA provisions, for example, will have wide-reaching implications for many individuals and businesses alike. It’s expected to be a priority for the Trump administration right out of the gate, come next year.”

Working with the IRS

In 2024, service problems with the IRS were cited as a leading issue for most CPA firms, according to an American Insitute of CPAs survey. Will the experience be much the same for firms in 2025?

With funding from the Inflation Reduction Act, the agency has been working to modernize its technology and systems and hire more employees. According to the IRS, the efforts are resulting in improved phone service, faster response times, and higher usage of its virtual assistant tool on key IRS.gov pages, among other improvements.

While progress has been made in improving service, there remains room for improvement.

“The IRS’s efforts to modernize are promising but still uneven,” said Hughes. “While e-filing and automation enhancements have improved processing times, challenges remain with responsiveness and issue resolution. The IRS recently received a multibillion-dollar cash infusion from the government to work on [modernizing] their systems and the increasing of their staff. This means increased security and oversight, including more audits. We anticipate an increase in these activities from the IRS over the next several years.”

Commenting on the IRS’s efforts, Cathy Rowe, senior vice president and segment leader of the U.S. professional market of Wolters Kluwer Tax and Accounting North America, said, “I think the rollouts have been slow, overall, but they are continuing to make progress. I think some of the improvements that we have seen already have been around their communications, so we are expecting that to continue to improve this tax season. Last season they did have a lot of new hires that could not necessarily answer the phones, so the training that they would have had should help for this coming tax season.”

However, looking ahead, Luscombe cautioned that the Trump administration reduced IRS funding, so “the longer term looks not quite as bright under the new administration.”

Automation, AI take center stage

It likely comes as little surprise that greater automation and increased usage of artificial intelligence-powered technology are top of mind for many as firms look for more ways to keep pace with legislative and regulatory changes, improve efficiencies, and ease staffing issues.

Take, for instance, Thomson Reuters’ new generative AI assistant, named CoCounsel, with which tax professionals can ask a question in everyday language and, within moments, the solution will deliver a relevant answer with links to Checkpoint Edge editorial content and source materials.

“As legislation expands, and we know that the talent shortage out there means that there’s more work to be done with less resources, in addition to making the research easier, we see the opportunity for increased automation of different phases of the tax preparation process to be really important. Whether that is the automation of the source document gathering and then eventually the extraction and mapping of that data into tax returns,” said Piritta van Rijn, head of product for accounting, tax and practice at Thomson Reuters. “And then, ultimately, when we go into these periods of change, being able to advise clients on what and how did these legislative changes impact them and what kind of actions to take.”

In light of the issues facing today’s firms, Thomson Reut­ers has been working to enhance its products and deliver more generative AI-assisted experiences to help firms do more with less, van Rijn noted.

During its Synergy 2024 user conference in November, Thomson Reuters showcased some of the developments such as Review Ready, an AI-assisted tax preparation experience to increase firm efficiency. It combines the power of CoCounsel with workflow automation and software integrations and will be coming in beta this tax season, starting with UltraTax CS. Based on testing to date, van Rijn said users could save at least two hours per 1040 tax return this coming season.

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Van Rijn also pointed to the recent acquisition of Materia, a U.S.-based startup that specializes in the development of an agentic AI assistant for the tax, audit and accounting profession. The agentic AI assistant automates and augments research and workflows to help accountants improve efficiency and effectiveness.

“We are really excited to see how we can evolve that [Materia] offering and use it to accelerate some of these other areas. We’ve already got some of our proprietary Checkpoint content integrated into the Materia platform, and we are excited to see how that can also then help enable more workflow automation, continue to augment the research capabilities, document analysis capabilities, and really drive that product,” van Rijn said.

Meanwhile, Wolters Kluwer is also taking steps to help firms increase automation and improve their ability to harness the power of data. At its recent CCH Connections user conference, the company showcased “some new modules as it relates to firm intelligence,” Rowe said.

“What you are going to see as we move into next year is some schedule optimization modules, and some new reporting modules … . We are also delivering research differently through our CCH Axcess platform, so we’ve had more integration of research within our tax and the browser views,” Rowe explained.

Hughes stated that his firm leverages advanced analytics to help clients optimize their tax positions, and they are also exploring the use of predictive AI for strategic financial modeling.

“In this area, Intuit Tax Advisor, which automatically integrates with Intuit ProConnect, is a game-changer. And since we require Intuit Quickbooks Online of all those we do monthly business bookkeeping and accounting for, the three-tiered process from Quickbooks Online to ProConnect to Tax Advisor makes tax planning so much easier than it had been in the past,” Hughes said.

Hughes also stated that the firm uses automation and AI tools to “streamline processes like data entry, to flag potential compliance risks, and to provide data-driven insights for strategic planning. This is done through AI-powered tax software. In addition, AI-powered tax software can now recommend tax strategies based on the client’s current situation. This allows us to spend more time on client engagement and proactive advisory work, helping clients avoid pitfalls and capitalize on opportunities.”

Serafi at KPMG expects that generative AI will “continue having a significant and positive impact on the profession, where benefits outweigh risks.”

“From automating routine tasks — such as data entry and recordkeeping, to free up human resources to focus on more strategic tax planning activities — to analyzing large sets of financial data to identify patterns and trends, and providing real-time insights and recommendations based on changing tax regulations and market conditions to help companies stay ahead of the curve and make more informed business decisions, we’re infusing the technology in our everyday processes and work and expect it to continue enabling our professionals to better serve our clients. Additionally, the technology is helping tremendously as we help clients navigate the current landscape in tax,” Serafi said.

And while leveraging technology can certainly help firms ease bandwidth constraints during tax season, they would be wise not to overlook additional ways to handle staff shortages or skill gaps, whether that means hiring talent from outside of the tax profession or outsourcing.

For example, Serafi said that a recent “Tax Reimagined” survey conducted by KPMG found that a greater number of corporate tax departments are rethinking their approach and hiring more technology experts who can learn tax, rather than hiring tax experts who can learn technology.

“While a blend of both tech and tax skills will continue to be important, we’re seeing a shift in the desire to increasingly prioritize tech proficiency in certain parts of the tax department,” Serafi said.

And at Counting Pennies, Hughes said the firm focuses on three things:

• Staffing at levels that allow for the firm to get work done even if one or two associates are out;
• Cross training as much as possible; and,
• Having a contractor or two available as a backup in the event of an emergency situation.

Clearly, there’s a lot of change, as well as lots of opportunities, afoot, as tax laws continue to evolve and tax professionals increasingly explore and navigate the powers of AI-enabled innovation.

“While we are still in early days, there is so much value, there is so much that is already available to our customers and to the industry. While it might be a little bit of the calm before the change, we are really optimistic and excited about the future ahead,” van Rijn said.