The IRS recently announced changes for more than 60 tax provisions to help offset inflation. We will review the most notable changes for 2025, from tax rates and deductions to credits and retirement contribution limits.
2025 Tax Brackets (Marginal Tax Rates)
Here are the adjusted tax brackets for the 2025 tax year to account for inflation. Although marginal tax rates remain the same as 2024 at 10%, 12%, 22%, 24%, 32%, 35%, and 37%, each bracket’s income thresholds have slightly increased.
For tax year 2025, the top tax rate remains 37% for individual single taxpayers with income greater than $626,350. This 37% rate also applies to married couples filing jointly who earn over $751,600.
Other marginal tax rates for 2025 include:
- 35%: single filers with income over $250,525 or married filing jointly over $501,050
- 32%: single filers with income over $197,300 or married filing jointly over $394,600
- 24%: single filers with income over $103,350 or married filing jointly over $206,700
- 22%: single filers with income over $48,475 or married filing jointly over $96,950
- 12%: single filers with income over $11,925 or married filing jointly over $23,850
2025 Standard Deduction
For single and married individuals filing separately for the 2025 tax year, the standard deduction increases 2.7% to $15,000 (+$400 from 2024).
The standard deduction also goes up 2.7% to $30,000 for married couples filing jointly (+$800 from 2024).
The standard deduction for heads of households will be 2.7% higher at $22,500 (+$600 from 2024).
2025 Child Tax Credit (CTC)
Maximum CTC remains $2,000 per qualifying child under 17. The refundable portion (Additional Child Tax Credit) will also be the same as 2024 at $1,700. Phase-out thresholds start at $200,000 for single filers and $400,000 for married couples filing jointly.
2025 Earned Income Tax Credit (EITC)
Taxpayers with three or more qualifying children can take the maximum EITC of $8,046, a 2.7% increase (+$216 from 2024). Keep in mind that maximum EITC amounts may be different for various phase-outs and income limits. The full range for EITC goes from $649 (0 children) up to $8,046 (3 or more children).
2025 Electric Vehicle (EV) Tax Credit
Clean vehicle tax credits provide up to $7,500 for purchasing a new or fuel cell electric vehicle. EVTC also offers taxpayers up to $4,000 if they buy a qualifying used EV or FCV. Credits can be applied to the purchase price of a qualifying vehicle or taken when you file your return.
2025 Adoption Credit
The maximum credit for adopting a child with special needs is $17,280, which can be applied for all qualified adoption expenses. This is a 3% increase (+$470 from 2024).
2025 Retirement Savings Contributions
401(k) and 403(b) contribution limits increase 2.2% to $23,000 (+$500 from 2024). Roth and Traditional IRA contribution limits will stay the same at $7,000 (under age 50) and $8,000 (age 50 or older). Note that the $1,000 difference between the age groups is the additional catch-up contribution for people over 50.
2025 Alternative Minimum Tax (AMT)
The exemption amount for unmarried individuals will increase 2.8% to $88,100 (+$2,400 from 2024). For married couples filing separately, the exemption will be $68,650. AMT for these two situations begins phasing out at $626,350.
The exemption amount for married couples filing jointly also increases 2.8% to $137,000 (+$3,700 from 2024). Phase-out starts at $1,252,700.
2025 Flexible Spending Account (FSA) Contributions
The IRS has increased the 2025 Flexible Spending Account (FSA) contribution limits to help employees manage healthcare and dependent care expenses. The new limits include a healthcare FSA maximum of $3,300 with a $660 rollover option and a dependent care FSA limit of $5,000.
Healthcare FSA funds cover doctor visits, prescription medications, mental health services, dental care, and vision expenses. Dependent care FSA funds are intended for daycare, after-school programs, elder care, and other qualifying costs that allow individuals to work or continue their education.
2025 Gift Exclusion
The annual exclusion for gifts will increase 5.6% to $19,000 (+$1,000 from 2024). Tax-free gifts include cash, property, stocks, bonds, and other valuable assets.
2025 Estate Exclusion
The basic exclusion amount for estates of individuals passing during 2025 will be 2.8% higher at $13,990,000 (+$380,000 from 2024).
2025 Exemptions, Credits, and Deductions That Won’t Change
Taxpayers will continue to see no personal exemption on their tax returns. Also, there remains no limitation on itemized deductions for 2025 — the Tax Cuts and Jobs Act of 2017 eliminated this limitation.
Since 2020, the Modified Adjusted Gross Income (MAGI) thresholds for the Lifetime Learning Credit have not been adjusted for inflation.
This education credit phases out for taxpayers with MAGI over $80,000 for single filers and $160,000 for joint returns.
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