IRS Announces New Tax Changes for 2025: What You Need to Know

On October 22^nd of 2024, the IRS introduced several important tax adjustments for 2025, which will affect returns filed in 2026. Key changes include:

1. Standard Deductions: Single filers can claim $15,000, while married couples filing jointly can claim $30,000.
2. Marginal Tax Rates: Tax rates range from 10% for incomes under $11,925 to 37% for incomes above $626,350.
3. Earned Income Tax Credit: Maximum EITC rises to $8,046 for families with three or more children.

These changes aim to adjust for inflation, providing taxpayers with updated thresholds and limits to consider in their 2025 tax planning.

Standard Deductions Increase

In 2025, taxpayers will benefit from higher standard deductions, making it easier to reduce taxable income. The standard deduction for single taxpayers will rise to $15,000, up by $400 compared to 2024. For married couples filing jointly, the deduction will increase by $800, reaching $30,000. Heads of households will see an increase to $22,500. These changes reflect the IRS’s adjustment for inflation, allowing taxpayers to reduce their taxable income more effectively.

Marginal Tax Rates Remain Unchanged

The marginal tax rates for 2025 will remain the same as in previous years, ranging from 10% to 37%, but the income thresholds for each bracket have been adjusted. The top 37% rate will apply to single taxpayers earning more than $626,350 and married couples earning over $751,600. The lowest rate, 10%, will apply to incomes under $11,925. These shifts help ensure tax burdens align with inflation.

Tax bracket changes for single filers in 2025

Table: Cadoli Multiservices LLC – Source: IRS

Tax bracket changes for married filing jointly in 2025

Table: Cadoli Multiservices LLC – Source: IRS

Earned Income Tax Credit Boost

For qualifying families with three or more qualifying children, the maximum Earned Income Tax Credit (EITC) increases to $8,046, up from $7,830 in 2024. This change aims to offer greater financial support to low-income families, especially those with larger households.

Health and Transportation Benefits

Employees can also take advantage of enhanced workplace benefits. The limit for contributions to health flexible spending arrangements will increase to $3,300, and the monthly cap for transportation and parking benefits rises to $325, giving workers more tax-free options for managing healthcare and commuting expenses.

Estate and Adoption Credits

The estate tax exclusion amount increases to $13,990,000 in 2025, providing more room for larger estates to avoid taxation. Additionally, the adoption credit will rise to $17,280, helping to cover the expenses for adopting a child with special needs.

Planning for 2025

Taxpayers should start preparing for these changes now, as they will affect tax returns filed in 2026. Whether you’re looking to optimize your deductions, take advantage of credits, or navigate new contribution limits, planning is key to minimizing tax liabilities.

For more detailed guidance and advice on navigating the 2025 tax changes, consider consulting our tax professional and financial advisor to ensure you’re fully prepared.