The IRS has released the annual inflation adjustments for 2025, including tax rate schedules, tax tables, and cost-of-living adjustments. These numbers will be used when preparing tax returns for the 2025 tax year, which begins on January 1, 2025.
There are seven tax rates in 2025, ranging from 10% to 37%. The top marginal tax rate is 37% for individual single taxpayers with incomes over $626,350. Personal exemption amounts will not exist in 2025 due to the 2017 tax reform law, which eliminated them.
Standard deduction amounts will increase in 2025, with individual and married couples receiving higher deductions than in 2024. Child-related adjustments, including the Child Tax Credit and Earned Income Tax Credit, will see slight increases in 2025. The adoption credit will also increase to $17,280 for the adoption of a child with special needs.
The Section 199A deduction for qualified business income will remain in effect in 2025, with threshold amounts starting at $394,600 for married taxpayers filing jointly. The Alternative Minimum Tax exemption amounts, Capital Gains rates, and education-related deductions and credits will also see adjustments for inflation in 2025.
Health-related items, such as Health Savings Accounts and Medical Savings Accounts, will have updated contribution limits for individuals and families. The shared individual responsibility payment has been eliminated for the 2025 tax year. Retirement account numbers, including IRAs and Roth IRAs, will be released by the IRS at a later date.
The foreign-earned income exclusion amount will increase to $130,000 in 2025, up from $126,500 in 2024. The federal estate tax exclusion and gift tax exclusion will also see increases for 2025. Itemized deductions, including medical expenses, state and local taxes, home mortgage interest, charitable donations, and casualty and theft losses, have not changed for 2025.
These official numbers, published by the IRS, provide taxpayers with the information they need to estimate their tax liability for the 2025 tax year. It is important for individuals to stay informed about any potential changes to tax laws that could impact their deductions and credits for the year.
