Annual Inflation Adjustments for 2025

The Internal Revenue Service announced the annual inflation adjustments for tax year 2025.

Detailed information on adjustments and changes to more than 60 tax provisions that will impact taxpayers when they file their returns in 2026 may be found on the IRS website in Revenue Procedure 2024-40.

Changes for tax year 2025

According to the IRS, the 2025 adjustments will apply to income tax returns filed during the 2026 tax season. Items that are of the greatest interest to many taxpayers include the following:

Standard deductions

• For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024.
• For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024.
• For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.

Marginal rates

For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).

Other rates are:

• 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
• 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
• 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
• 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
• 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
• 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

Alternative minimum tax exemption amounts

• For tax year 2025, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350.
• For married couples filing jointly, the exemption amount increases to $137,000 and begins to phase out at $1,252,700.

Earned income tax credits

For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.

Qualified transportation fringe benefit

For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing from $315 in tax year 2024.

To learn about additional changes and to read the entire release, please click here.

Questions?

As always, should you have questions on this or other matters affecting you or your business, please call or email us to speak with a CPA today.

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