The IRS recently announced their annual inflation adjustments (including tax brackets) for the 2025 tax year, that will impact individual taxpayers when they file their returns in 2026.
Notable changes for tax year 2025
Standard deductions. For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.
Marginal rates. 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). The other rates are:
o 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
o 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
o 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
o 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
o 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
o 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
Health flexible spending cafeteria plans. For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
Estate tax credits. Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.
Annual exclusion for gifts increases to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
Unchanged for tax year 2025
Personal exemptions for tax year 2025 remain at 0, as in tax year 2024. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017.
Itemized deductions. There is no limitation on itemized deductions for tax year 2025, as in tax year 2024 and preceding, to tax year 2018. The limitation on itemized deductions was eliminated by the Tax Cuts and Jobs Act of 2017.
For further detailed information on adjustments and changes to more than 60 tax rovisions, refer to the following IRS Revenue Procedure 2024-40:
For more information, please contact one of the experienced tax professionals at Bormel, Grice & Huyett, P.A. at 301-953-3259 or 410-792-7259
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