The Internal Revenue Service revealed comprehensive tax inflation adjustments for 2025 today, marking significant increases in standard deductions and tax bracket thresholds.
The changes, detailed in Revenue Procedure 2024-40, reflect the government’s response to ongoing inflation pressures and will impact millions of Americans filing their returns in 2026.
Quick Facts
- Standard deduction for married couples filing jointly increases by $800 to $30,000
- Single filer standard deduction rises to $15,000, up $400 from 2024
- Top tax rate remains at 37% but applies to incomes over $626,350 for single filers
- Maximum Earned Income Tax Credit increases to $8,046 for families with three or more children
Tax Brackets Adjust Upward
The 2025 tax year brings notable shifts in income thresholds across all tax brackets while maintaining the same percentage rates. The adjustments aim to prevent “bracket creep,” where inflation pushes taxpayers into higher tax brackets without real income increases.
Tax Rate |
Single Filers |
Married Filing Jointly |
|---|---|---|
| 37% | Over $626,350 | Over $751,600 |
| 35% | Over $250,525 | Over $501,050 |
| 32% | Over $197,300 | Over $394,600 |
| 24% | Over $103,350 | Over $206,700 |
| 22% | Over $48,475 | Over $96,950 |
| 12% | Over $11,925 | Over $23,850 |
| 10% | $11,925 or less | $23,850 or less |
Benefits and Credits See Increases
Several key tax benefits will see increases for 2025. The foreign earned income exclusion rises to $130,000, while the adoption credit for children with disabilities increases to $17,280.
Additionally, the monthly limitation for qualified transportation fringe benefits and qualified parking increases to $325.
Estate Planning and Gifts
High-net-worth individuals will see the basic estate tax exclusion amount rise to $13,990,000, up from $13,610,000 in 2024. The annual gift tax exclusion also increases, reaching $19,000 per recipient for calendar year 2025.
Impact and Implications
These adjustments represent the IRS’s continuing effort to address inflation’s impact on taxpayers’ financial obligations.
While the changes provide some relief through increased deductions and higher bracket thresholds, taxpayers should note that certain provisions, including the personal exemption, remain at zero due to the Tax Cuts and Jobs Act of 2017.
Whats Next?
Taxpayers should begin planning for these changes now, though they won’t take effect until the 2025 tax year. Financial advisors recommend reviewing withholding amounts and adjusting tax planning strategies to optimize benefits under the new thresholds.
Sources: THX News & Internal Revenue Service.
