The IRS has announced the annual inflation adjustments for the year 2025, including tax rate schedules, tax tables and cost-of-living adjustments.
These are the official numbers for the tax year 2025—that tax year begins January 1, 2025. These are not the numbers that you’ll use to prepare your 2024 tax returns in 2025 (you’ll find those official 2024 tax numbers here). These are the numbers that you’ll use to prepare your 2025 tax returns in 2026.
If you aren’t expecting any significant changes in 2025, you can use the updated numbers to estimate your liability. If you plan to make more (or less) money or change your circumstances—including getting married, starting a business, or having a baby—consider adjusting your withholding or tweaking your estimated tax payments.
Tax Brackets and Tax Rates
There are seven (7) tax rates in 2025. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37% (there is also a zero rate).
Here’s how those break out by filing status:
Top Marginal Tax Rates
Your marginal tax rate determines what you pay when you receive the next dollar of income—it represents the highest tax rate you pay for the year. For the tax year 2025, the top tax rate is 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).
The other rates are:
- 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).
Personal Exemption Amounts
Due to the 2017 tax reform law, there will be no personal exemption amounts in 2025. Personal exemptions used to decrease your taxable income before you determined the tax due. You were generally allowed one exemption for yourself (unless you could be claimed as a dependent by another taxpayer), one exemption for your spouse if you filed a joint return, and one personal exemption for each of your dependents—but that’s no longer the case. Notably, this is one of the provisions that could be affected if the Tax Cuts and Jobs Act (TCJA) is allowed to “sunset” or expire at the end of 2025 (as the law is currently written).
Standard Deduction Amounts
The standard deduction amounts will increase to $15,000 for individuals and married couples filing separately, representing an increase of $400 from 2024. Married couples filing jointly will see a deduction of $30,000, a boost of $800 from 2024, while heads of household will see a jump to $22,500 for heads of household, an increase of $600 from 2024.
For 2025, the additional standard deduction amount for the aged or the blind is $1,600. The additional standard deduction amount increases to $2,000 for unmarried taxpayers.
For 2025, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,350 or the sum of $450 and the individual’s earned income (not to exceed the regular standard deduction amount).
Child-Related Adjustments
The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages and salary, like dividends and interest.
Your child must pay taxes on their unearned income in 2025, but if that amount is more than $1,350 but less than $13,500, you may be able to elect to include that income on your return rather than file a separate return for your child.
The same “regular” rules apply to earned income.
There’s a lot of chatter in Congress about making changes to the Child Tax Credit, but so far, there’s no action. If nothing changes, the maximum amount of the child tax credit that may be refundable will be $1,700 in 2025.
For 2025, the maximum Earned Income Tax Credit (EITC) amount available is $8,046 for married taxpayers filing jointly who have three or more qualifying children—it was $7,830 in 2024. Phaseouts apply.
For 2025, the adoption credit for adopting a child with special needs is $17,280, and the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $17,280—up from $16,810 in 2024. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $259,190; it’s completely phased out at $299,190 or more.
Section 199A (Qualified Business Income) Deduction
As part of the 2017 tax reform law, sole proprietors and owners of pass-through businesses like LLCs, S corporations, and partnerships may be eligible for a deduction of up to 20% to lower the tax rate for qualified business income. The deduction is subject to threshold and phased-in amounts. For 2025, the threshold amounts begin at $394,600 for married taxpayers filing jointly.
Alternative Minimum Tax (AMT)
The AMT exemption rate is also adjusted for inflation. The AMT exemption amount for tax year 2025 for single filers is $88,100 and begins to phase out at $626,350 (in 2024, the exemption amount for single filers was $85,700 and began to phase out at $609,350). In 2025, the AMT exemption amount for married couples filing jointly is $137,000 and begins to phase out at $1,252,700 (in 2024, the exemption amount for married couples filing jointly was $133,300 and began to phase out at $1,218,700).
Capital Gains Rates
Capital gains rates will not change for 2025, but the brackets for the rates will change. Most taxpayers pay a maximum 15% rate, but a 20% tax rate applies if your taxable income exceeds the thresholds set for the 37% ordinary tax rate. Exceptions also apply for art, collectible, and section 1250 gain (related to depreciation). The maximum zero rate amounts and maximum 15% rate amounts break down as follows:
Education Related & Student Loans
For 2025, the $2,500 maximum deduction for interest paid on student loans—called qualified education loans—will begin to phase out for taxpayers with modified adjusted gross income above $85,000 ($170,000 for joint returns) and will completely phase out for taxpayers with modified adjusted gross income of $100,000 or more ($200,000 or more for joint returns).
For the 2025 tax year, the adjusted gross income (AGI) amount for joint filers to determine the reduction in the Lifetime Learning Credit is $160,000; the AGI amount for single filers is $80,000. That amount is not adjusted for inflation for taxable years beginning after December 31, 2020.
In 2025, the amount of the eligible educator deduction allowed in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom is $300. That amount remains unchanged from 2024.
Fringe Benefits—Transportation
In 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $325, an increase of $10 from the 2024 amount.
Health Related Items
Health Savings Accounts (HSA). In 2025, the annual contribution limitation for an individual with self-only coverage under a high deductible health plan (HDHP) will be $4,300 ($8,550 for a family). At age 55, individuals can contribute an additional $1,000.
Medical Savings Accounts (MSA). For 2025, a high-deductible health plan (HDHP) is one that, for participants who have self-only coverage in an MSA, has an annual deductible that is not less than $2,850 (an increase of $50 from 2024) but not more than $4,300 (an increase of $150 from 2023). For participants with family coverage, an annual deductible that is not less than $5,700 (a boost from $5,550 in 2024) but not more than $8,550 in 2025 (up from $8,350 in 2024). For self-only coverage, the maximum out-of-pocket expense amount is $5,700 in 2024, an increase of $150 from 2024. For family coverage in 2025, the maximum out-of-pocket expense amount is $10,500 in 2025, an increase of $300 from 2024.
The unpopular shared individual responsibility payment has been eliminated for the tax year 2025.
IRAs & Other Retirement Accounts
Looking for retirement numbers for IRAs (including Roth IRAs) and qualified plans? We’ll link to those once the IRS has made them available.
Foreign-Earned Income Exclusion
In 2025, the foreign-earned income exclusion amount is $130,000, up from $126,500 in tax year 2024.
Federal Estate & Gift Tax
The federal estate tax exclusion for decedents dying will increase to $13,990,000 per person (up from $13,610,000 in 2024) or $27,980,000 per married couple in 2025. (The exclusion could take a dip in 2026 if Congress allows it to sunset to pre-TCJA values.)
The federal gift tax exclusion will increase to $19,000 in 2025, up from $18,000 in 2024. That means you can gift $19,000 per person to as many people as you want with no federal gift tax consequences in 2025; if you split gifts with your spouse, that total is $38,000. If your spouse is not a U.S. citizen, tax-free gifts are limited to present interest gifts whose total value is below the annual exclusion amount, which is $190,000 in 2025 (it was $185,000 in 2024).
Itemized Deductions
Itemized deductions found on Schedule A have not changed. Here’s a refresher on some of the most common:
- Medical and Dental Expenses. The “floor” for medical and dental expenses is 7.5% in 2025, which means you can only deduct those expenses which exceed 7.5% of your AGI.
- State and Local Taxes. Deductions for state and local sales, income, and property taxes remain in place and are limited to a combined total of $10,000, or $5,000 for married taxpayers filing separately.
- Home Mortgage Interest. You may only deduct interest on acquisition indebtedness—your mortgage used to buy, build or improve your home—up to $750,000, or $375,000 for married taxpayers filing separately. For more on mortgage interest under the TCJA, click here.
- Charitable Donations. As a result of tax reform, the percentage limit for charitable cash donations to public charities increased from 50% to 60% in 2018 and will remain at 60% for 2025.
- Casualty and Theft Losses. The deduction for personal casualty and theft losses has been repealed except for losses attributable to a federal disaster area.
- Job Expenses and Miscellaneous Deductions subject to 2% floor. Miscellaneous deductions, including unreimbursed employee expenses and tax preparation expenses, which exceed 2% of your AGI have been eliminated.
Again, keep an eye out on legislation in the coming year—it could impact some of these Schedule A deductions which were modified or eliminated by the 2017 tax reform moves.
More Info
These are the official numbers published by the IRS. You can compare these numbers to the 2025 Bloomberg projections here.
You can read all of the official IRS numbers in Revenue Procedure 2024-40.
Read the full article here
