As of July 1, 2025, here are the latest tax law updates and developments relevant to individuals and businesses in the United States:
Federal Tax Law Updates (IRS)
1. 2025 Tax Reform Proposals Still Under Negotiation
- Congress is debating extensions or modifications to the 2017 Tax Cuts and Jobs Act (TCJA) provisions that are set to expire after 2025.
- Key topics under debate:
- Whether to extend the 20% QBI deduction (§199A) for passthrough businesses.
- Possible changes to the individual tax brackets and standard deduction amounts.
- Reinstatement of personal exemptions and broader child tax credits.
- State and Local Tax (SALT) deduction cap possibly being adjusted or eliminated.
2. IRS Final Regulations on Digital Assets
- Effective for tax year 2025, the IRS issued final regulations requiring:
- Crypto brokers and platforms to issue Form 1099-DA for digital asset transactions.
- Enhanced reporting rules for crypto-to-crypto trades and NFTs.
- Foreign asset disclosures now explicitly include certain crypto holdings under Form 8938.
3. IRS Penalty Relief and Processing Updates
- The IRS announced limited penalty relief for taxpayers affected by mail backlogs and delays in 2020–2021.
- Continued improvements in automated processing, especially for amended returns and Form 2848 (POA submissions).
California State Tax Updates
1. FTB Expands E-File and AI Audit Tools
- The Franchise Tax Board (FTB) has launched an AI-based system to flag high-risk returns, particularly for high-net-worth individuals and passthrough entities.
- More aggressive enforcement of nonresident sourcing rules (especially for tech and entertainment sectors).
2. 2025 CA Climate and Green Tax Credits
- California is increasing incentives for:
- EV purchases
- Solar installations (AB 712 credit)
- Green building retrofits for commercial property owners
Other Key Changes
1. Retirement Plan Changes (SECURE 2.0 Phase-In)
- Starting January 1, 2025, catch-up contributions for individuals earning $145,000+ must be made on a Roth basis.
- Automatic enrollment is now mandatory for most new 401(k) plans.
2. IRS Interest Rates
- As of Q3 2025, IRS interest rates remain at:
- 8% for underpayments (individuals and most corporations)
- 10% for large corporate underpayments
Targeted Tax Law Update – July 2025
🔹 Expiring TCJA Provisions – Advance Planning Required
- Top individual tax rate is still 37%, but expected to revert to 39.6% after 2025.
- Standard deduction and QBI (§199A) deduction phaseouts are under scrutiny.
- Recommendation: Begin multi-year income planning and Roth conversions now while rates are still low.
🔹 Digital Asset Reporting
- IRS finalized new crypto reporting rules (Form 1099-DA).
- Crypto-to-crypto trades and NFT gains are now reportable and taxable.
- Clients must be advised to track basis and report foreign-held digital assets on Form 8938.
🔹 IRS Enforcement
- IRS is hiring new agents focused on high-income taxpayers (income >$400,000).
- Increases in audit risk for stock option exercises, partnership K-1s, and complex deductions.
🔹 Pass-Through Tax Planning
- QBI deduction (§199A) still applies for 2025 but may expire in 2026.
- Consider S-corp elections, reasonable compensation adjustments, and aggregation strategies to preserve benefits.
🔹 Foreign Grant Compliance & Reporting
- IRS and Treasury are now actively auditing nonprofits with international operations.
- Must have:
- Written grant agreements
- Expenditure tracking systems
- Foreign activity disclosures on Form 990, Schedule F
🔹 Donor Acknowledgment Letters
- Enforcement tightening on substantiation rules.
- Letters must state:
- Whether goods/services were provided
- Description of donation
- Written contemporaneously (by tax return due date)