The Internal Revenue Service announced today the annual inflation adjustments for tax year 2025.
Here’s a summary of the IRS’s inflation adjustments for tax year 2025:
- Standard Deductions:
- Single/married filing separately: $15,000 (up by $400).
- Married filing jointly: $30,000 (up by $800).
- Head of household: $22,500 (up by $600).
- Marginal Tax Rates:
- Top rate of 37% for incomes over $626,350 (single) and $751,600 (joint).
- Other rates: 35%, 32%, 24%, 22%, 12%, and 10% for lower income thresholds.
- Alternative Minimum Tax (AMT):
- Exemption for single filers: $88,100 (phasing out at $626,350).
- Married filing jointly: $137,000 (phasing out at $1,252,700).
- Earned Income Tax Credit (EITC):
- Maximum credit: $8,046 for taxpayers with three or more qualifying children (up from $7,830).
- Qualified Transportation and Health Fringe Benefits:
- Monthly transportation and parking limits: $325 (up from $315).
- Health flexible spending: $3,300 contribution limit and $660 carryover.
- Medical Savings Accounts:
- Self-only deductible: $2,850 to $4,300.
- Family deductible: $5,700 to $8,550 with a $10,500 out-of-pocket limit.
- Foreign Earned Income Exclusion:
- Increased to $130,000 (up from $126,500).
- Estate and Gift Tax:
- Estate exclusion: $13,990,000.
- Annual gift exclusion: $19,000.
- Adoption Credit:
- Maximum credit: $17,280 (up from $16,810).
Unchanged:
- Personal exemptions remain at 0.
- No limitation on itemized deductions.
- Lifetime Learning Credit phase-out starts at $80,000 ($160,000 for joint returns).
Reference: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025