The Internal Revenue Service (IRS) has released its annual inflation adjustments for tax year 2025. Detailed information about the adjustments and changes to the over 60 tax provisions impacting taxpayers can be found in Revenue Procedure 2024-40. The adjustments described below generally apply to income tax returns that will be filed in 2026 for tax year 2025. Keep these provisions in mind as you start shaping your 2025 tax strategy:
Standard Deduction
| Filing Status | 2024 | 2025 |
| Single or Married Filing Separately (MFS) | $ 14,600 | $ 15,000 |
| Married Filing Jointly (MFJ) | $ 29,200 | $ 30,000 |
| Head of Household (HoH) | $ 21,900 | $ 22,500 |
The 2025 standard deduction for individuals who can be claimed as a dependent by another taxpayer is the greater of either (a) $1,350 or (b) the sum of the individual’s earned income plus $450, not to exceed $15,000.
The additional standard deduction for married taxpayers who are over age 65 at the end of the tax year and for taxpayers who are blind is increased to $1,600 ($2,000 for unmarried taxpayers who are not surviving spouses) for 2025.
Marginal Tax Rates
Marginal rates for tax year 2025 are as follows:
| Rate | Single | MFJ |
| 10% for incomes less than or equal to … | $ 11,925 | $ 23,850 |
| 12% for incomes over … | $ 11,925 | $ 23,850 |
| 22% for incomes over … | $ 48,475 | $ 96,950 |
| 24% for incomes over … | $ 103,350 | $ 206,700 |
| 32% for incomes over … | $ 197,300 | $ 394,600 |
| 35% for incomes over … | $ 250,525 | $ 501,050 |
| 37% for incomes over … | $ 626,350 | $ 751,600 |
Tax rates for heads of household and married individuals filing separate returns are available in the Revenue Procedure.
Alternative Minimum Tax (AMT) Exemption
| Filing Status | 2024 | 2025 |
| Single or Head of Household (HoH) | $ 85,700 | $ 88,100 |
| Married Filing Jointly (MFJ) | $ 133,300 | $ 137,000 |
| Married Filing Separately (MFS) | $ 66,650 | $ 68,500 |
The Alternative Minimum Tax exemption for estates and trusts has also increased to $30,700 for the tax year 2025.
Earned Income Tax Credit (EITC)
| 2024 | 2025 | |
| Maximum Earned Income Tax Credit | $ 7,830 | $ 8,046 |
Qualifying taxpayers with three or more qualifying children are eligible for the maximum EITC. Refer to the Revenue Procedure, which contains a table listing the maximum EITC amounts for taxpayers with less than three qualifying children, and which outlines the relevant earned income limits and phaseout amounts.
Qualified Transportation Fringe Benefits
| 2024 | 2025 | |
| Transit and parking exclusion, monthly limitation | $ 315 | $ 325 |
To take advantage of this exclusion, commuter benefits must be provided as part of the employer’s fringe benefits plan.
Health Flexible Spending Arrangements (FSAs)
| 2024 | 2025 | |
| Dollar limitation | $ 3,200 | $ 3,300 |
| Maximum carryover amount (if permitted) | $ 640 | $ 660 |
Medical Savings Accounts (MSAs)
A health plan must meet the following criteria to be considered a “high deductible health plan” for MSA purposes:
| Coverage Type | 2024 | 2025 |
| Self-Only Coverage: | ||
| Annual deductible, minimum | $ 2,800 | $ 2,850 |
| Annual deductible, maximum | $ 4,150 | $ 4,300 |
| Annual out-of-pocket, maximum | $ 5,550 | $ 5,700 |
| Family Coverage: | ||
| Annual deductible, minimum | $ 5,550 | $ 5,700 |
| Annual deductible, maximum | $ 8,350 | $ 8,550 |
| Annual out-of-pocket, maximum | $ 10,200 | $ 10,500 |
MSAs are different from Health Savings Accounts (HSAs). HSA-related inflation adjustments for 2025 were previously announced in Revenue Procedure 2024-25.
Foreign Earned Income Exclusion
| 2024 | 2025 | |
| Foreign earned income exclusion | $ 126,500 | $ 130,000 |
Estate and Gift Tax
| 2024 | 2025 | |
| Basic exclusion amount (lifetime exemption) | $ 13,610,000 | $ 13,990,000 |
| Annual gift tax exclusion | $ 18,000 | $ 19,000 |
Adoption Credits
| 2024 | 2025 | |
| Credit for qualified adoption expenses | $ 16,810 | $ 17,280 |
The enactment of the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the personal exemption and suspended the limitation on itemized deductions (the “Pease limitation”) through the end of 2025, thus these amounts will not be indexed for the upcoming tax year. Modified adjusted gross income (MAGI) limitations pertaining to the Lifetime Learning Credit will also not be indexed, as has been the case since tax year 2021.
Anders Family Wealth and Estate Planning advisors work with individuals and their families to devise strategic plans to protect your assets and provide for the next generation. To learn more about how our services can support your long-term financial goals, and the associated cost, request a meeting below.
