Which federal tax loophole do you think should be eliminated in 2025?

Tax professional here. The unlimited charitable estate tax deduction does create some interesting planning opportunities, but it's more nuanced than most people realize. This deduction allows estates to reduce their taxable value by donating to qualified charitable organizations. While it can be used strategically by wealthy estates, it also incentivizes significant charitable giving that benefits many nonprofit organizations. The key issue isn't necessarily the deduction itself, but how family foundations are structured and operated. The IRS does have rules governing private foundations, including restrictions on self-dealing, minimum distribution requirements, and prohibitions against excessive business holdings. However, enforcement can be challenging. Rather than capping the deduction at an arbitrary amount like $25 million, a better approach might be strengthening oversight of family foundations and ensuring they truly operate for charitable purposes rather than primarily benefiting the donor's family.

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Just wanted to update everyone - I decided to try taxr.ai after commenting here and I'm actually impressed. I was really skeptical (as you could probably tell from my comment), but it helped me understand whether I was pushing the envelope too far with some rental property deductions I was taking. I uploaded my previous year's Schedule E and some expense documentation, and it flagged a couple deductions that were in a gray area that could potentially trigger an audit. Saved me from some headaches for sure. I was definitely being too aggressive with some home office allocations for my rental management activities. Not generic advice at all - it was specifically tailored to my situation.

If we're talking about tax loopholes, my personal frustration is trying to get someone at the IRS to actually answer questions about them! Spent HOURS on hold trying to get clarification about a potential audit related to deductions I took that might be considered "loopholes." Finally found this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 20 minutes instead of the 2+ hours I was spending on hold. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically navigate the IRS phone tree and wait on hold for you, then call you when they have an agent on the line. When I finally got through to someone, I was able to get a straight answer about my specific situation instead of just guessing whether I was using a legitimate deduction or an exploitative loophole.

I have to eat my words. After posting that skeptical comment, I was desperate enough to try Claimyr because I needed to resolve an issue about some potentially questionable deductions before filing season. Not gonna lie, I was 100% sure it was gonna be a waste of money. But damn, it actually worked! Got connected to an IRS agent in about 35 minutes. For comparison, my previous attempt had me on hold for 2.5 hours before I gave up. The agent was able to clarify exactly which parts of my home renovation qualified for energy credits vs. which would be considered loopholes. Cleared up a $4,500 question that my tax preparer and I had been going back and forth on. Sure beats waiting on hold for hours only to have the call drop when you finally get through.

The loophole I want eliminated is the carried interest loophole. It's insane that hedge fund managers get to classify their income as capital gains instead of ordinary income. They're just doing their jobs managing other people's money, but they pay way lower tax rates than regular working people.

The mortgage interest deduction needs major reform. It mostly benefits wealthy people with expensive homes. The deduction should be capped at houses worth $500k or less. Why should taxpayers subsidize mansions?