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Published: November 16, 2024
Modified: January 8, 2025
As the IRS releases key 2025 tax changes, it’s crucial to understand how these updates could impact your tax situation. Adjustments to deductions, tax brackets, and contribution limits can affect your tax-saving strategies this year.
At Raining Pennies, one of my goals is to distill financial information from sources that can often be complex, ambiguous, or lengthy. This blog is an example of that effort. I discovered the IRS adjustments for 2025 through their “e-News for Small Business” newsletter, a resource that keeps me informed on important tax updates. By tackling the hard work of sifting through these updates, I strive to save you time and help you navigate your finances with clarity and confidence.
Here, we’ll break down the notable changes for 2025 with side-by-side comparisons to 2024, helping you plan effectively for the new tax year.
Common Provisions to Point Out
While some tax provisions may seem obscure, others are highly relevant and of interest to most taxpayers. Below are a few of the more common provisions and adjustments that can impact your financial planning:
- Standard Deductions: Adjusted each year for inflation, the standard deduction reduces the amount of income subject to tax, offering immediate tax relief.
- Marginal Tax Rates: These rates determine the percentage of tax owed on your taxable income within specific brackets, affecting everyone from low to high-income earners.
- Annual Gift Tax Exclusion: You can give up to the exclusion amount to anyone in a tax year, including any family members or friends, without incurring gift taxes, making it a valuable tool for tax-free wealth transfer. For 2025, the exclusion amount is $19,000.
Notable Changes for Tax Year 2025
In 2025, the IRS has made several inflation adjustments across key tax provisions. These adjustments affect standard deductions, marginal tax rates, credits, and other tax-related thresholds.
The table below provides a side-by-side comparison of these changes from 2024 to 2025, helping you understand how these updates may impact your tax liability in the new year.
| Tax Provision | 2025 Value | 2024 Value | Difference |
|---|---|---|---|
| Standard Deductions | |||
| Single Filers and Married Individuals Filing Separately | $15,000 | $14,600 | +$400 |
| Married Filing Jointly | $30,000 | $29,200 | +$800 |
| Head of Household | $22,500 | $21,900 | +$600 |
| Marginal Tax Rates | |||
| 10% Rate | |||
| Single Filers and Married Individuals Filing Separately | $11,925 or less | $11,600 or less | +$325 |
| Married Filing Jointly | $23,850 or less | $23,200 or less | +$650 |
| 12% Rate | |||
| Single Filers and Married Individuals Filing Separately | Over $11,925 | Over $11,600 | +$325 |
| Married Filing Jointly | Over $23,850 | Over $23,200 | +$650 |
| 22% Rate | |||
| Single Filers and Married Individuals Filing Separately | Over $48,475 | Over $47,150 | +$1,325 |
| Married Filing Jointly | Over $96,950 | Over $94,300 | +$2,650 |
| 24% Rate | |||
| Single Filers and Married Individuals Filing Separately | Over $103,350 | Over $100,525 | +$2,825 |
| Married Filing Jointly | Over $206,700 | Over $201,050 | +$5,650 |
| 32% Rate | |||
| Single Filers and Married Individuals Filing Separately | Over $197,300 | Over $191,950 | +$5,350 |
| Married Filing Jointly | Over $394,600 | Over $383,900 | +$10,700 |
| 35% Rate | |||
| Single Filers and Married Individuals Filing Separately | Over $250,525 | Over $243,725 | +$6,800 |
| Married Filing Jointly | Over $501,050 | Over $487,450 | +$13,600 |
| 37% Rate (Top Tax Rate) | |||
| Single Filers | Over $626,350 | Over $609,350 | +$17,000 |
| Married Individuals Filing Separately1 | Over $375,800 | Over $365,600 | +$10,200 |
| Married Filing Jointly | Over $751,600 | Over $731,200 | +$20,400 |
| Alternative Minimum Tax (AMT) Exemption | |||
| Single Filers | $88,100 | $85,700 | +$2,400 |
| Married Individuals Filing Separately | $68,500 | $66,650 | +$1,850 |
| Married Filing Jointly | $137,000 | $133,300 | +$3,700 |
| Medical Savings Accounts (MSA) | |||
| Self-Only Coverage | |||
| Minimum Deductible | $2,850 | $2,800 | +$50 |
| Maximum Out-of-Pocket | $5,700 | $5,550 | +$150 |
| Family Coverage | |||
| Minimum Deductible | $5,700 | $5,550 | +$150 |
| Maximum Out-of-Pocket | $10,500 | $10,200 | +$300 |
| Other Benefits, Deductions, Exclusions, and Credits | |||
| Earned Income Tax Credit (EITC) Maximum (For 3 or More Qualifying Children) | $8,046 | $7,830 | +$216 |
| Qualified Transportation Fringe Benefit | $325/month | $315/month | +$10/month |
| Health Flexible Spending Plans | $3,300 | $3,200 | +$100 |
| Foreign Earned Income Exclusion | $130,000 | $126,500 | +$3,500 |
| Estate Tax Basic Exclusion Amount | $13,990,000 | $13,610,000 | +$380,000 |
| Annual Gift Tax Exclusion | $19,000 | $18,000 | +$1,000 |
| Adoption Credits | $17,280 | $16,810 | +$470 |
| Footnotes: 1. The tax rate values for Single Filers and Married Individuals Filing Separately are the same except for the 37% rate. | |||
Unchanged for Tax Year 2025
While many tax provisions have been adjusted for inflation in 2025, some remain unchanged from 2024. The following table highlights tax provisions that retain the same values as the previous tax year.
| Tax Provision | 2025 Value | 2024 Value | Difference |
|---|---|---|---|
| Personal Exemption | $0 | $0 | $0 |
| Limitation on Itemized Deductions | None | None | $0 |
| Lifetime Learning Credit Phase-Out Threshold | |||
| Single Filers | $80,000 | $80,000 | $0 |
| Married Filing Jointly | $160,000 | $160,000 | $0 |
Summary
These adjustments reflect the IRS’s efforts to align tax provisions with inflation, ensuring taxpayers aren’t unduly affected by rising costs. It’s advisable to review these changes in detail and consider how they may impact your tax planning for the upcoming year.
For more information on the IRS adjustments for 2025, see IRS releases tax inflation adjustments for tax year 2025 ↗.
To learn about ways to cut your tax bill, see 10 Proven Ways to Cut Your Tax Bill in 2024.