If there’s one thing that’s as inevitable as death and taxes, it’s changes to the tax code and 2025 is no different. Luckily, not all of these changes are bad. Let’s take a look at some of the changes coming in 2025 that could affect your bottom line.
Change #1: Revised Tax Brackets
The 2025 tax year will see new tax brackets that apply to income tax returns. This isn’t a massive change or an unexpected one, as the IRS usually changes these each year to adjust for inflation. These are a good thing, as they help prevent taxpayers from getting pushed into higher tax brackets (and pay higher taxes) when they get an annual raise or cost of living adjustment to their income. The new tax brackets are as follows:
- 10%: For incomes up to $11,925 (Up to $23,850 for married couples filing jointly)
- 12%: For incomes more than $11,925 ($23,850 for married couples filing jointly)
- 22%: For incomes more than $48,475 ($96,950 for married couples filing jointly)
- 24%: For incomes more than $103,350 ($206,700 for married couples filing jointly)
- 32%: For incomes more than $197,300 ($394,600 for married couples filing jointly)
- 35%: For incomes more than $250,525 ($501,050 for married couples filing jointly)
- 37%: For incomes more than $626,350 ($751,600 for married couples filing jointly)
Change #2: Standard Deductions
You can sometimes save more money on your taxes if you itemize your deductions, but many taxpayers appreciate the convenience of standard deductions. The following list shows how much the new standards deductions will be:
- Single filers: $15,000 (a $400 increase)
- Married couples filing jointly: $30,000 (an $800 increase)
- Head of household filers: $22,500 (a $600 increase)
Change #3: Earned Income Tax Credit
For the 2025 tax year, the maximum Earned Income Tax Credit limit goes up to $8,046 (this maximum was $7,830 for the 2024 tax year). This is the maximum Earned Income Tax Credit a qualifying taxpayer can expect if they have three or more qualifying children. As you might expect, these limits go down if there are fewer qualifying children:
- Two qualifying children: The new maximum is $7,152 (up from $6,960 in 2024)
- One qualified child: The new maximum is $4,328 (up from 4,213 in 2024)
- No qualifying children: The new maximum is $649 (up from $632 in 2024)
Change #4: Estate Tax Credit
The 2025 tax year has a bigger basic exclusion amount of $13,990,000. In 2024 it was $13,610,000.
Change #5: Alternative Minimum Tax Exemption
In 2024, the exemption amount for unmarried individuals was $85,700 ($133,300 for married couples filing jointly). In 2025, these amounts rise to $88,100 for unmarried individual filers and $137,000 for married couples filing jointly. The phase-out threshold is also increasing, with a new amount of $626,350, up from $609,350 in 2024.
Change #6: Adoption Tax Credit
An adoption of a child now has a maximum credit of $17,280, which is up from the $16,810 maximum limit for the 2024 tax year.
Change #7: Transportation Fringe Benefit
The monthly qualified transportation fringe benefit rises to $325, a $10 increase from 2024.
Change #8: Foreign Income Exclusion
In 2025, this exclusion is rising by $3,500 to $130,000.
More Uncertainty Coming in 2025
One of the biggest changes in 2025 is the fact that many key parts of the Tax Cuts and Jobs Act of 2017 will expire. Unless they’re renewed by Congress, key tax benefits that many taxpayers enjoy will be reduced, such as the standard deduction, lower marginal tax rates, and the child tax credit. Given the uncertain political climate and the fact that 2024 is a presidential election year means it’s difficult to plan for these changes. However, consulting with a tax professional can help, especially when planning for worst-case scenarios. bject to Form 8938’s reporting and filing requirements, you should consult with a tax professional.
Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!