Dear Investors,

I hope your 2025 is off to a great start.

Like most years, there are several tax law and investment regulation changes that take effect this year, that impact many investors and are summarized below.

1) Post Secure ACT Inherited IRA Required Minimum Distribution Enforcement

Following the passage of the Secure ACT 2.0, nearly all non-spousal beneficiaries of IRA accounts inherited in 2020 or later must fully deplete those accounts within ten years of the original owner’s death. For accounts inherited from an owner who was taking required minimum distributions (RMD’s), beneficiaries must also take an RMD each year as well. For the past several years, the IRS waived the penalties for individuals who failed to take their RMD, however this year those penalties will be enforced. The penalty is 25% of the amount you should have withdrawn.

2) 401(k) Catch-Up Boost

This year, investors participating in workplace 401(k), 403(b), or 457 plans can defer up to $23,500 from their salary, up from $23,000 in 2024. Those over the age of 50 can also contribute the extra catch-up amount of $7,500 for a total of $31,000.

Brand new this year, however, is a “super catch-up” provision for investors aged 60 to 63 who are covered under an above workplace plan. In 2025, there is an extra catch up of $3,750 permitted for workers between the ages of 60 and 63, bringing the total possible amount of salary deferrals to $34,750 for 2025 ($23,500 deferral + $7,500 catch up + $3,750 super catch-up).

We encourage everyone who are able to take advantage of this. Be sure to check with your Human Resources or Payroll department on your eligibility and ability to participate in this super catch-up.

3) Uncertain (But Hopeful) Future of the Tax Cuts & Jobs ACT (TCJA)

At the end of 2025, the tax law changes enforced by TCJA of 2017 are set to expire. This impacts a variety of elements including ordinary income tax brackets, the corporate tax rate, the qualified business income (QBI) deduction, the $10,000 state and local tax deduction (SALT), and the lifetime gift/estate tax exemption.

At the present, President Trump and Congressional Republicans have indicated a strong desire to extend many of the core provisions of the TCJA, as well as introduce some enhancements. Time will tell for which provisions of the law are extended or changed.

As always, please don’t hesitate to contact us with any questions or to discuss specifics to your situation.

Sincerely,

Andrew J. Derrenbacker, CFA, CFP®

Partner