The IRS has announced tax updates for 2025, including increased standard deductions, inflation-adjusted tax brackets, higher limits for credits like EITC and adoption credits and updated phase-out thresholds for deductions. Plan ahead with these changes to maximize your tax benefits.
Each year, the IRS makes adjustments to several items that affect individual taxpayers who file Form 1040 to report their taxable income and income tax for the prior calendar year. Typically, these changes are due to inflation, and the end result is that less income may be taxable for the year. On October 1, 2024, the IRS announced updates for the 2025 tax year to help taxpayers plan for the coming year.
Standard Deductions
The Tax Cuts and Jobs Act of 2017 (TCJA) made significant changes to the Internal Revenue Code starting with the 2018 tax year. One of the updates that affected taxpayers the most was increasing the amount of the standard deduction while at the same time eliminating the personal exemption, which previously allowed for an exemption for each taxpayer and their dependents. Since this change, the vast majority of taxpayers take the standard deduction rather than itemizing deductions because it’s more advantageous to do so. Here are the 2025 itemized deductions for each filing status:
- Single and married filing separately: $15,000, an increase of $400 from the 2024 tax year
- Married filing jointly: $30,000, an increase of $800 from 2024
- Head of household: $22,500, an increase of $600 from 2024
- Seniors (taxpayers who are over 65) are eligible for an additional standard tax deduction of $2,000 for single or head of household taxpayers and $1,600 for taxpayers with a filing status of married filing jointly.
Tax Brackets and Rates
The tax rates remain the same for 2025, ranging from 10% to a maximum rate of 37%. The brackets – the minimum and maximum taxable income amounts to which the tax rates apply – have been adjusted for inflation. Here are the tax brackets and rates for the 2025 tax year:
Tax Brackets and Rates by Taxpayer
| Tax Rate | For Taxpayers with Single Filing Status | For Taxpayers with Married Filing Jointly Status | For Taxpayers with Head of Household Filing Status |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 |
| 37% | $626,351 or more | $751,601 or more | $626,351 or more |
Earned Income Tax Credits
Maximum EITC
For taxpayers who qualify for the Earned Income Tax Credit (EITC), the maximum amount has increased. The amount of the EITC varies depending on the taxpayer’s income level and the number of qualifying children. Here are the details for 2025:
| Number of Qualifying Children | One | Two | Three or More | None |
| Earned Income Amount | $12,730 | $17,880 | $17,880 | $8,490 |
| Maximum Amount of Earned Income Tax Credit | $4,328 | $7,152 | $8,046 | $649 |
| Phaseout Earned Income Amount (Married Filing Jointly) | $30,470 | $30,470 | $30,470 | $17,730 |
| Full Phaseout Earned Income Amount (Married Filing Jointly) | $57,554 | $64,430 | $68,675 | $26,214 |
| Starting Phaseout Earned Income Amount (All other filing statuses) | $23,350 | $23,350 | $23,350 | $10,620 |
| Full Phaseout Earned Income Amount (All other filing statuses) | $50,434 | $57,310 | $61,555 | $19,104 |
Other Tax Credits and Adjustments
Tax laws often undergo adjustments to reflect changes in income thresholds, inflation and other factors. Below is a summary of key updates and adjustments to various tax credits, deductions and limits for 2025 that taxpayers should be aware of when planning their finances.
For the 2025 student loan interest deduction, the $2,500 maximum deduction for student loan interest starts to phase out for single taxpayers with a modified adjusted gross income (MAGI) over $85,000, and for joint taxpayers with MAGI over $170,000. The deduction is entirely phased out for single filers with MAGI of $100,000 or more and joint filers with MAGI of $200,000 or more.
If you qualify for the foreign earned income exclusion, the amount of foreign earned income that is excluded from federal taxes will increase from $126,500 in 2024 to $130,000 in 2025.
Taxpayers who adopt a child with special needs may be eligible for a maximum adoption tax credit of $17,280 for 2025, an increase of $470 from 2024.
Taxpayers with a flexible spending arrangement (FSA) through their employers will see an increase in the maximum amount they can contribute on a pre-tax basis to $3,300 in 2025. If the plan allows the employee to carry over unused funds in the account, the maximum amount they can carry over increases to $660 for 2025.
As for educator expenses, most elementary and secondary school teachers are eligible to deduct the amount they pay out of pocket for qualifying classroom supplies, with the maximum deduction for 2025 being $300.
Taxpayers may be eligible to exclude from their taxable income interest they received from U.S. savings bonds when the bonds are cashed in and used to pay for higher education expenses. There are limits on a taxpayer’s modified adjusted gross income to qualify for this exclusion, which starts to phase out when MAGI is over $149,250 for joint filers and $99,500 for all other tax returns. The exclusion phases out entirely with MAGI of $179,250 for joint returns and $114,500 for all others.
Taxpayers who qualify for a transportation fringe benefit from their employers will see an increase in the monthly maximum amount for both transit passes and parking to $325 for 2025.
The IRS has established minimum penalties for taxpayers who fail to file tax returns and information returns before the filing deadline. Individual taxpayers who are required to file Form 1040 before the deadline but fail to do so within 60 days of the due date may be subject to a penalty of the lesser of $525 or 100% of the amount of tax owed on the return.
Common Tax Items With No Changes For 2025
Some tax-related items are not adjusted annually for inflation, so they will not change for 2025. Here are a few items that have not changed for the 2025 tax year:
- Personal exemptions were eliminated with the TCJA starting with the 2018 tax year and remaining at $0 for 2025.
- The limitation on itemized deductions was also eliminated with the TCJA, so there is no limit in place for 2025.
- The MAGI amount used to calculate whether a taxpayer qualifies for the maximum Lifetime Learning Credit (LLC) remains the same for 2025: the LLC is phased out at a MAGI over $80,000 for single taxpayers and $160,000 for joint returns.
Expiration of The Tax Cuts and Jobs Act of 2017
The 2025 tax year is the last year for which the TCJA of 2017 will be in effect, since it is set to expire at the end of 2025. Expiration of the TCJA would bring significant changes to the tax code starting with the 2026 tax year unless Congress acts to either extend the TCJA or passes legislation to modify the tax code effective January 1, 2026. Taxpayers who like to plan ahead should keep an eye on Congress to see what its plans are for the tax code in 2026 and beyond.
Editor Norah Layne contributed to this article.