{"id":4609,"date":"2024-10-23T14:30:32","date_gmt":"2024-10-23T14:30:32","guid":{"rendered":"https:\/\/tysllp.com\/?p=4609"},"modified":"2024-10-23T14:52:45","modified_gmt":"2024-10-23T14:52:45","slug":"notable-changes-for-tax-year-2025","status":"publish","type":"post","link":"https:\/\/tysllp.com\/notable-changes-for-tax-year-2025\/","title":{"rendered":"Notable changes for tax year 2025"},"content":{"rendered":"\n

IRS announces new federal income tax brackets for 2025<\/strong><\/h1>\n\n\n\n

The IRS has announced new federal income tax brackets<\/a> and standard deductions for 2025.<\/p>\n\n\n\n

In its announcement on Tuesday, the agency raised the income thresholds for each bracket, which applies to tax year 2025 for returns filed in 2026. The top rate of 37% applies to individuals with taxable income<\/a> above $626,350 and married couples filing jointly earning $751,600 or more for 2025.  <\/p>\n\n\n\n

The IRS also boosted figures for dozens of other provisions, including long-term capital gains brackets, estate and gift tax exemption and eligibility for the child tax credit, among others.<\/p>\n\n\n\n

Federal tax brackets for 2025<\/h2>\n\n\n\n

Federal income tax brackets show how much you owe on each part of your \u201ctaxable income,\u201d which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
\u2022 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).<\/p>\n\n\n\n

\u2022 35% for incomes over $250,525 ($501,050 for married couples filing jointly).<\/p>\n\n\n\n

\u2022 32% for incomes over $197,300 ($394,600 for married couples filing jointly).<\/p>\n\n\n\n

\u2022 24% for incomes over $103,350 ($206,700 for married couples filing jointly).<\/p>\n\n\n\n

\u2022 22% for incomes over $48,475 ($96,950 for married couples filing jointly).<\/p>\n\n\n\n

\u2022 12% for incomes over $11,925 ($23,850 for married couples filing jointly).<\/p>\n\n\n\n

\u2022 10% for incomes of $11,925 or less ($23,850 or less for married couples filing jointly).<\/p>\n\n\n\n

Alternative minimum tax exemption amounts.<\/strong> For tax year 2025, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350. For married couples filing jointly, the exemption amount increases to $137,000 and begins to phase out at $1,252,700.<\/p>\n\n\n\n

Earned income tax credits.<\/strong> For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.<\/p>\n\n\n\n

Qualified transportation fringe benefit.<\/strong> For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing from $315 in tax year 2024.
 <\/p>\n\n\n\n

Health flexible spending cafeteria plans.<\/strong> For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
 <\/p>\n\n\n\n

Medical savings accounts<\/strong>. For tax year 2025, participants who have self-only coverage the plan must have an annual deductible that is not less than $2,850 (a $50 increase from the previous tax year), but not more than $4,300 (an increase of $150 from the previous tax year).
The maximum out-of-pocket expense amount rises to $5,700, increasing from $5,550 in tax year 2024.
For family coverage in tax year 2025, the annual deductible is not less than $5,700, increasing from $5,550 in tax year 2024; however, the deductible cannot be more than $8,550, an increase of $200 versus the limit for tax year 2024. For family coverage, the out-of-pocket expense limit is $10,500 for tax year 2025, rising from $10,200 in tax year 2024.<\/p>\n\n\n\n

Foreign earned income exclusion.<\/strong> For tax year 2025, the foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.<\/p>\n\n\n\n

Estate tax credits.<\/strong> Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.<\/p>\n\n\n\n

Annual exclusion for gifts increases<\/strong> to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.<\/p>\n\n\n\n

Adoption credits.<\/strong> For tax year 2025, the maximum credit allowed for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for tax year 2024.<\/p>\n\n\n\n

After 2025, lower taxes enacted by former President Donald Trump<\/a> will sunset without action from Congress. If the provision expires, the tax brackets will revert to 2017 levels<\/a>, shifting to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.<\/p>\n\n\n\n

Higher standard deduction<\/h2>\n\n\n\n

The standard deduction will also increase in 2025, rising to $30,000 for married couples filing jointly, up from $29,200 in 2024. Starting in 2025, single filers can claim $15,000, a bump from $14,600.<\/p>\n\n\n\n

Trump\u2019s tax cuts also included higher standard deductions, which will sunset after 2025 if Congress doesn\u2019t extend that tax break.<\/p>\n\n\n\n

Revenue Procedure 2024-40 PDF<\/strong><\/a> provides detailed information on adjustments and changes to more than 60 tax provisions that will impact taxpayers when they file their returns in 2026.<\/p>\n\n\n\n

Unchanged for tax year 2025<\/strong><\/h2>\n\n\n\n