As we close out 2024 and look forward to 2025, we review the recent tax changes announced by the IRS for tax year 2025. These changes will apply to income tax returns filed in the 2026 tax season, and are important for tax planning in 2025. It is important to do your tax planning throughout the year, and not wait until the end of the year or when you are ready to file your taxes.
This is a video explaining the changes. The same information is below in the text.
Below are some of the more impactful changes.
Standard Deduction:
The IRS adjusts the standard deduction each year for inflation. For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000, an increase of $400 from 2024.
For taxpayers with head of household status, who have dependents and pay for more than half of their household expenses, the standard deduction increases to $22,500 for 2025, an increase of $600 from 2024.
For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024.
Standard Deduction Changes in 2025
Filing Status | 2024 Standard Deductions | 2025 Standard Deductions |
Single | $14,600.00 | $15,000.00 |
Married Filing Separately | $14,600.00 | $15,000.00 |
Head of Household | $21,900.00 | $22,500.00 |
Married Filing Jointly | $29,200.00 | $30,000.00 |
For example, in 2025 a single filer or a married individual filing separately with an income of $70,000 can take the standard deduction and lower their taxable income to $55,000.
If these same individuals have itemized deductions less than the standard deduction of $15,000, he or she should take the standard deduction instead of the itemized deductions, as this will give them a lower taxable income. However, if their itemized deductions are more than the standard deduction, he or she should take the itemized deduction.
Tax Bracket Changes in 2024 & 2025
The IRS revises tax brackets each year to keep pace with inflation. The 2024 tax rates are the same as for 2023, but the income subject to each bracket increased.
While we talk about the changes for tax year 2025, let’s not forget we are still in tax year 2024, and you still have time to get the advice you need to reduce your tax taxes for 2024.
Tax Brackets for 2024 & 2025
The top tax rate for tax year 2025 remains at 37% for single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).
Tax Rate for 2024 & 2025
Tax Rates | 2024 Single Taxpayer | 2025 Married, Filing Jointly |
37% | Incomes over $609,350 | Incomes over $731,200 |
35% | Incomes over $243,725 | Incomes over $487,450 |
32% | Incomes over $191,950 | Incomes over $383,900 |
24% | Incomes over $100,525 | Incomes over $201,050 |
22% | Incomes over $47,150 | Incomes over $94,300 |
12% | Incomes over $11,600 | Incomes over $23,200 |
10% | Incomes of $11,600 or less | Incomes of $23,200 or less |
Tax Rate | 2025 Single Taxpayer | 2025 Married, Filing Jointly |
37% | Incomes over $626,350 | Incomes over $751,600 |
35% | Incomes over $250.525 | Incomes over $501,050 |
32% | Incomes over $197,300 | Incomes over $394600 |
24% | Incomes over $103,350 | Incomes over $206,700 |
22% | Incomes over $48,475 | Incomes over $96,950 |
12% | Incomes over $11,925 | Incomes over $23,850 |
10% | Incomes of $11,925 or less | Incomes of $23,850 or less |
Retirement Plan Contribution Changes for 2024
The annual contribution limit for employees who contribute to 401(k) and 403(b) plans increased from $22,500 to $23,000 for 2024. Employees over the age of 50 can contribute an additional $7,500 for 2024.
Individual Retirement Account (IRA) contribution limit for workers below the age of 50 is $7,000 for 2024 and for workers over age 50 the limit is $8,000.
Earned Income Credit
The Earned Income Tax Credit (EITC) for qualified taxpayers who have three or more qualifying children for tax year 2025 increased from $7,830 to $8,046.
Prepare for the Changes
This is an opportune time to take proactive steps to benefit from these changes.
Consult with a tax professional: Meet with your tax advisor to understand how these changes will affect your situation and adjust your tax planning strategies, if necessary.
Keep Detailed Records: Maintain accurate records of all income, expenses and deductions to ensure you are in compliance with all changes and can maximize your tax benefits.
Review Your Financial Plans: Revisit and review your financial and estate planning strategies in light of the announced changes.
The IRS tax changes impact almost all taxpayers. By understanding and preparing for these changes, you can optimize your tax situation and navigate the evolving tax landscape effectively. Stay proactive, informed and get professional guidance to ensure compliance and to maximize your benefits.
To learn more about tax changes click on the link below