Every year, the IRS makes inflation adjustments for various tax provisions. By accounting for inflation, the IRS aims to prevent individuals and businesses from being inadvertently pushed into higher tax brackets, thus preserving the integrity of the taxation framework. We’ve outlined the 2025 updates for you to stay aware of throughout the new year.
2025 Standard Deductions
These deductions apply for the new year and do not affect your 2024 tax return.
| Status | 2025 Standard Deduction |
|---|---|
| Married Filing Jointly | $30,000 |
| Single of Married Filing Separately | $15,000 |
| Head of Household | $22,500 |
2025 Marginal Rates
| Tax Rate | Income for Individuals | Income for Married Filing Jointly |
|---|---|---|
| 37% | >$626,350 | >$751,600 |
| 35% | >$250,525 | >$501,050 |
| 32% | >$197,300 | >$394,600 |
| 24% | >$103,350 | >$206,700 |
| 22% | >$48,475 | >$96,950 |
| 12% | >$11,925 | >$23,850 |
| 10% | $11,925 or less | $23,850 or less |
IRA
The IRA contribution limit for 2025 is $7,000 and $8,000 for those older than 50. These are the same limits as 2024. The 2025 IRA catch-up contributions remain at $1,000.
401(k) Plans
In 2025, the maximum contribution limit for employees in 401(k) plans will rise to $23,500 while the catch-up contributions available for individuals aged 50 and above will move to $8,000.
Alternative Minimum Tax Exemption
The 2025 AMT exemption threshold is $88,100 and begins to phase out at $626,350 for single filers or heads of household. For married couples filing jointly, the threshold begins at $137,000 and phases out at $1,252,700.
Earned Income Tax Credit
The 2025 maximum Earned Income Tax Credit for qualifying taxpayers with three or more qualifying children is $8,046.
Qualified Transportation Fringe Benefit & Qualified Parking
The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking for tax year 2025 is $325.
Medical Savings Account – MSA
For participants who have self-only coverage in a Medical Savings Account for tax year 2025, the plan must have an annual deductible of between $2,850 and $4,300, an increase of $150 from the previous year. For family coverage, the plan must have an annual deductible must be between $5,700 and $8,550. The maximum out-of-pocket expense amount for self-only coverage is $5,700. For family coverage, this limit is $10,500.
Flexible Spending Account – FSA
For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,300. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $660, an increase of $20 from taxable years beginning in 2024.
Health Savings Account – HAS
Taxpayers who have individual coverage under a High Deductible Health Plan(HDHP), the plan must have an annual deductible not less than $1,650 and a maximum out-of-pocket expense of $8,300, can contribute up to $4,300 in 2025. Taxpayers with family coverage under a HDHP, the plan must have an annual deductible not less than $3,300 and maximum out-of-pocket expense of $16,600, can contribute up to $8,550 in 2025. Individuals over 55 can contribute an additional $1,000 per year to the HSA.
Foreign Earned Income Exclusion
The 2025 foreign earned income exclusion, for qualifying US citizens or US resident aliens with tax homes in a foreign country, is $130,000 which is an increase of $3,500 from 2024.
Estates of Decedents
Estates of individuals who pass away in 2025 possess a basic exclusion amount of $13,990,000. This is an increase from the $13,610,000 basic exclusion amount for estates of decedents who passed away in 2024.
Gifts
The 2025 annual exclusion for gifts has increased by $1,000 for 2024, at $19,000 for tax year 2025.
Written By: Benjamin Errington
