As we enter 2025, several key changes to government benefits and tax exemptions have taken effect, impacting individuals and families across the United States. From increases in Social Security benefits to adjustments in estate and gift tax exemptions, these updates provide new opportunities for financial planning. Here, we break down the most significant changes and how they may affect you and your loved ones.

Social Security Benefit Increase

One of the most anticipated updates for 2025 is the cost-of-living adjustment (COLA) for Social Security beneficiaries. This annual adjustment is designed to help benefits keep pace with inflation. For 2025, the COLA is set at 2.5%, resulting in 2.5% more money received in 2025, than you did in 2024.

• Who Benefits?
  • Retirees receiving Social Security benefits.
  • Individuals on Social Security Disability Insurance (SSDI).
  • Eligible dependents and survivors.
• Why It Matters: With rising costs in healthcare, housing, and everyday expenses, this increase provides much-needed relief to millions of Americans relying on Social Security.

Medicare Adjustments

In addition to Social Security, Medicare premiums and deductibles have also been updated for 2025. While Part B premiums have risen slightly, the increase is offset for many by the higher Social Security benefits.

• Key Changes:
  • The standard Part B premium is between $185-$628.90 per month
  • The hospital deductible is $1,676
  • Income-related adjustment amounts (IRMAA) thresholds have shifted, potentially impacting higher-income beneficiaries.

Estate and Gift Tax Exemption Amounts

For individuals and families engaged in estate planning, the 2025 adjustments to estate and gift tax exemptions are particularly noteworthy. The federal estate and gift tax exemption has increased to $13.990 million per individual. This means married couples can now shield up to $27.980 million from federal estate taxes by utilizing portability.

• Lifetime Gift Tax Exemption: The increased exemption also applies to lifetime gifts, allowing individuals to transfer wealth to their heirs during their lifetime without incurring federal gift tax, up to the new threshold.
• Annual Gift Tax Exclusion: The annual gift tax exclusion amount has risen to $19,000 per recipient. This allows for more tax-efficient gifting strategies.

Planning Opportunities for 2025

These changes create significant opportunities for proactive financial and estate planning:

1. Review Your Estate Plan:
   • If your estate plan was created under previous exemption limits, now is the time to revisit it to ensure you’re maximizing the benefits of the new thresholds.
2. Leverage Increased Gifting Limits:
   • Consider using the higher annual gift tax exclusion to transfer assets to family members or fund education accounts like 529 plans.
3. Evaluate Trust Structures:
   • Trusts remain a powerful tool for minimizing tax liability and ensuring the smooth transfer of wealth. Higher exemptions may influence whether existing trust structures need modification.
4. Coordinate With Your Financial Team:
   • Work with your attorney, accountant, and financial advisor to integrate these changes into your broader wealth management strategy.

Additional Considerations

• State-Specific Tax Rules: While federal exemptions have increased, many states have their own estate and inheritance taxes with lower thresholds. Be sure to account for these in your planning.
• Potential Future Changes: The current federal estate and gift tax exemptions are set to sunset in 2026, reverting to pre-2018 levels unless Congress acts to extend or modify them. This makes 2025 a crucial year for maximizing current opportunities.

Conclusion

The 2025 increases in government benefits and tax exemptions offer valuable opportunities to improve financial security and optimize estate planning. By staying informed and taking proactive steps, you can ensure that you and your family are well-positioned to benefit from these updates.

At Tully Law Group, we specialize in helping individuals and families navigate complex estate planning and elder law matters. If you have questions about how these changes impact your specific situation, don’t hesitate to reach out. Together, we can create a strategy that aligns with your goals and secures your legacy for future generations.