For the 2025 tax year, the IRS has published its yearly inflation adjustments, which will have an impact on a number of tax laws, such as income tax brackets, standard deductions, credits, and deductions. According to Revenue Procedure 2024-40, these adjustments are intended to preserve taxpayer advantages in the face of growing expenses and could result in tax savings for taxpayers in 2026.
IRS Inflation Adjustments 2025 is available on Rev. Proc. 2024-40, which also contains updated tax rate schedules. The standard deduction will increase by $400 from 2024 to $15,000 for married individuals and single taxpayers filing separately. Married couples filing jointly will have a $800–$30,000 boost in the deduction. In comparison to the previous year, heads of households will receive a deduction of $22,500, an increase of $600.
IRS Inflation Adjustments for 2025
Revenue Procedure 2024-40, which details major inflation adjustments for the 2025 tax year, was released by the Internal Revenue Service (IRS). These adjustments will have an impact on a number of tax provisions when taxpayers file their returns in 2026. The IRS must account for inflation in the applicable dollar amounts under a number of Internal Revenue Code sections, many of which apply to individual income taxes and others to company revenue. Being aware of IRS Inflation Adjustments 2025 can help in tax planning, especially for those trying to maximize their savings.
Key Changes for Tax Year 2025
Marginal Tax Rates- Individuals with incomes over $626,350 who are single filers continue to pay the highest tax rate of 37%; other tax brackets have been adjusted to include:
- More than USD 250,525 in income is subject to a 35 % tax ($501,050 for married couples filing jointly).
- More than USD 197,300 in income, 32 % ($394,600 for married couples filing jointly).
- More than USD $103,350 in income are subject to a 24 % tax ($206,700 for married couples filing jointly).
- Income above USD $48,475 ($96,950 for married couples filing jointly), the rate is 22%.
- USD 11,925 (US Dollar 23,850 for married couples filing jointly) is the 12 % income threshold.
- 10% of incomes US Dollar 11,925 (USD 23,850 for married couples filing jointly) or less.
Estate and Gift Tax:
The annual exclusion for gifts and the basic exclusion amount for estate tax have been increased.
- In 2025, the basic exclusion for estates will be USD 13,990,000.
- The annual gift exclusion will increase to USD 19,000.
Standard Deductions:
- The standard deduction will increase from USD 14,600 in 2024 to USD 15,000 for married individuals and single taxpayers filing separately. T
- he standard deduction will increase to USD 30,000 from $29,200 for married couples filing jointly.
Alternative Minimum Tax (AMT) Exemption: Married couples filing jointly and single taxpayers will both receive increases in their AMT exemption levels.
EITC: Previously USD 7,830, the maximum EITC for eligible taxpayers with 3 or more qualifying children will now be USD 8,046.
QTFB: Qualified transportation fringe benefits and parking will now have a USD 325 per month cap.
FSA’s: Employee health flexible spending plans will see an increase in the contribution cap to $3,300.
MSA’s: The deductible and out-of-pocket spending caps for medical savings accounts (MSAs) have been adjusted.
Foreign Earned Income Exclusion: From $126,500, the exclusion level will now be $130,000.
Adoption Credits: The highest credit amount for adopting a special needs child has been adjusted.
Other Adjustments in Details
- For the 2025 tax year, the alternative minimum tax exemption limit for single people rises to $88,100 ($68,650 for married people filing separately), and it starts to phase out at $626,350, according to the IRS.
- For qualifying taxpayers with three or more qualifying children, the maximum EITC amount has increased from USD 7,830 for tax year 2024 to $8,046 for tax year 2025. The qualifying transportation fringe benefit and qualifying parking benefit now have monthly limitations of $325, up from $315 during the 2024 tax year.
- Employee salary reductions for contributions to health flexible spending plans are now limited to $3,300 for tax years starting in 2025, which is $100 more than it was the year before. In comparison to tax year 2024, the maximum out-of-pocket cost for self-only coverage has increased by $150 to $5,700. The yearly deductible for family coverage in 2025 is $1,700, which is $150 more than in 2024, although it cannot exceed $8,550, which is $200 more than in 2024. The out-of-pocket limit for family coverage is $10,500, which is $300 more than it was in 2024.
- The tax year 2024 FEIE is gone upto $130,000 from USD 126,500. The $13,990,000 baseline exclusion threshold for estates of deceased people who pass away in 2025 has been raised from $13,610,000 for estates of deceased people who pass away in 2024. The yearly exclusion for gifts is raised from $18,000 for the year 2024 to $19,000 for the year 2025. From $16,810 for TY 2024 to $17,280 for TY 2025, the maximum credit permitted for adopting a kid with special needs is the amount of eligible adoption expenses.
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Niamh Prescott has a degree in Mass Communication and an MBA in Finance. She has worked for two media houses and is now running her own media company.