As the 2024 tax filing season approaches, it’s equally important to look ahead to the 2025 tax rates and IRS updates. In late October 2023, the IRS announced significant changes through Revenue Procedure 2024-40. These updates include adjustments to income tax brackets, standard deductions, Earned Income Credit, and estate and gift taxes. Here’s a detailed breakdown to help you and your clients plan effectively for the coming year.
2025 Income Tax Brackets
The IRS has adjusted the income tax brackets for inflation and other economic factors. Below is an overview of the 2025 brackets, categorized by filing status:
10% Tax Bracket
- Single: $0 – $11,925
- Married Filing Jointly: $0 – $23,850
- Married Filing Separately: $0 – $11,925
- Head of Household: $0 – $17,000
12% Tax Bracket
- Single: $11,926 – $48,475
- Married Filing Jointly: $23,851 – $96,950
- Married Filing Separately: $11,926 – $48,475
- Head of Household: $17,001 – $64,850
22% Tax Bracket
- Single: $48,476 – $103,350
- Married Filing Jointly: $96,951 – $206,700
- Married Filing Separately: $48,476 – $103,350
- Head of Household: $64,851 – $103,350
Additional Brackets
- 24%: Income up to $197,300 (Single) or $394,600 (Married Filing Jointly)
- 32%: Income between $103,351 and $197,300 (Single) or $206,701 and $394,600 (Married Filing Jointly)
- 35%: Income between $197,301 and $250,525 (Single) or $394,601 and $501,050 (Married Filing Jointly)
- 37%: Income over $626,350 (Single) or $751,600 (Married Filing Jointly)
Standard Deduction Increases
The standard deduction amounts for 2025 have risen, offering greater relief to taxpayers.
- Single: $15,000 (up from $14,600 in 2024)
- Married Filing Jointly: $30,000 (up from $29,200 in 2024)
- Married Filing Separately: $15,000 (up from $14,600 in 2024)
- Head of Household: $22,500 (up from $21,900 in 2024)
Earned Income Credit Updates
The Earned Income Credit (EIC) for 2025 has been adjusted to reflect inflation. Here’s a breakdown:
Earned Income Thresholds
- 1 Child: $12,730
- 2 Children: $17,880
- 3 or More Children: $17,880
- No Children: $8,490
Maximum Credit Amount
- 1 Child: $4,328
- 2 Children: $7,152
- 3 or More Children: $8,046
- No Children: $649
Phaseout Thresholds
Married Filing Jointly:
- Phaseout begins at $30,470
- Phaseout completed by:
- 1 Child: $57,554
- 2 Children: $64,430
- 3 or More Children: $68,675
- No Children: $26,214
All Other Filing Statuses:
- Phaseout begins at $23,350
- Phaseout completed by:
- 1 Child: $50,434
- 2 Children: $57,310
- 3 or More Children: $61,555
- No Children: $19,104
Estate and Gift Tax Updates
The estate and gift tax thresholds for 2025 have also increased:
- Basic Exclusion for Decedents: $13,990,000
- Annual Gift Tax Exclusion: $19,000
Key Takeaways
The 2025 tax updates reflect adjustments for inflation and evolving economic conditions. These changes impact all aspects of tax planning, from income brackets and deductions to credits and estate planning. Practitioners should familiarize themselves with these updates to provide better guidance to their clients.
For detailed advice tailored to individual financial situations, consulting a tax professional or financial advisor is highly recommended.
Source: The US government says you can apply for SSI for $943 or $1415 a month
