The Internal Revenue Service (IRS) has announced new federal income tax brackets and standard deductions for 2025, which will apply to returns filed in 2026. To protect taxpayers from inflation impact, tax rates, deductions, and credits will be adjusted for 2025.
According to the IRS, the standard deduction will increase for the 2025 tax year. For single taxpayers and married individuals filing separately, the standard deduction will rise to $15,000, marking a $400 increase from the 2024 amount.
Married couples filing jointly will see their standard deduction increase to $30,000, an $800 rise from the previous year. For heads of households, the standard deduction will be $22,500 for tax year 2025 — up $600 from 2024.
In addition to higher standard deductions, the IRS has proposed several other significant changes for 2025. Notable adjustments include updates to long-term capital gains brackets, estate and gift tax exemption limits, and eligibility criteria for the child tax credit, reported NBC News.
Key adjustments for tax year 2025 include:
- Alternative Minimum Tax (AMT) exemptions: $88,100 for unmarried individuals, $68,650 for married individuals filing separately, and $137,000 for married couples filing jointly.
- Earned Income Tax Credit (EITC): Up to $8,046 for taxpayers with three or more qualifying children, marking an increase from $7,830 for tax year 2024.
- Qualified transportation fringe benefit: $325 monthly limit, increasing from $315 in tax year 2024.
- Health flexible spending cafeteria plans: $3,300 annual limit, increasing from $3,200 in tax year 2024.
- Medical savings accounts: Deductibles range from $2,850 to $4,300 for self-only, and $5,700 to $8,550 in family coverage.
- Foreign earned income exclusion: $130,000, an increase from $126,500 in tax year 2024.
- Estate tax credits: $13,990,000 basic exclusion amount, increased from $13,610,000 for estates of decedents who died in 2024.
- Annual exclusion for gifts: $19,000, rising from $18,000 for calendar year 2024.
- Adoption credits: up to $17,280 for special needs adoptions, increased from $16,810 for tax year 2024.
For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). Following are the other rates for different income levels:
- 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
- 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
- 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
- 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
- 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
- 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
Post-2025, the tax cuts from former President Donald Trump will expire unless Congress intervenes. If they do lapse, the tax rates will go back to what they were in 2017: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, according to NBC.
For the tax year 2025, personal exemptions remain $0, there is no limitation on itemized deductions, and Lifetime Learning Credit phase-out thresholds remain $80,000 and $160,000 for single and joint returns, respectively.
