The Internal Revenue Service (IRS) has made inflation adjustments in over 60 tax areas for 2025 that will impact tax filers in the 2026 tax season.
The IRS announced a swath of updates for 2025 in a recent press release. Here are some points from the list of 2025 Adjusted Items:
- Medical savings accounts: There is a small increase in minimums and maximums for annual deductibles for self-only coverage.
- Tax brackets: Given the cooling economy, adjustments are slightly less than in previous years with higher inflation. Thresholds changed slightly across the board with the highest bracket of 37 percent reserved for those with income of $626,351 and above.
- Standard deductions: The standard deduction for 2025 will rise to $15,000 for single taxpayers and married individuals. The deduction for married filing jointly will be $30,000, and heads of households will see a standard deduction of $22,500.
- Estate tax and gift exclusions: Estate exemptions in 2025 will rise to $13,990,000 a slight increase from last year. The gift tax exclusion will increase $1,000 from $18,000 in 2024 to a $19,000 annual exclusion for 2025.
- Foreign earned income: Another gain is in the foreign earned income exclusion. The exclusion will increase from $126,500 in 2024 to $130,000 in 2025.
- Adoption: The allowable tax credit for the adoption of a child with special needs increased to $17,280 from $16,810 in 2024.
- Capital gains: A zero-tax rate on capital gains will apply to individuals who earn up to $48,350 or $96,700 for married couples. That rate jumps to 15 percent for single filers earning between $48,350 and $533,400. Over $533,400, the tax rate and capital gains increase to 20 percent.
- Earned income tax credit: This tax credit is intended to offer relief to qualifying families with children. The maximum tax credit for qualifying families is $8,046.00.
The IRS also notes some items will remain the same, including personal exemptions which will continue to be zero, as in 2024. Itemized deductions remain unlimited for 2025, and Lifetime Learning Credits for qualified filers remains the same as in 2024.
More tax action is expected with the incoming administration. If you have questions about your taxes, financial profile, and what is ahead for 2025, talk to a knowledgeable tax attorney.
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