IRS Adjusts Tax Rates for 2025

10.25.2024
Issues & Policies

The Internal Revenue Service released inflation-adjusted tax rates and standard deductions for 2025 Oct. 23, with annual income thresholds increasing about 2.8%.

Tax rates are adjusted each fall and with inflation cooling in recent months, next year’s adjustments are smaller than in 2023 and 2024.

The new tax brackets, standard deduction, and other policies apply to income earned in 2025, which taxpayers report on their 2026 returns.

In 2025, the standard deduction will increase $400 to $15,000 for a single filer and rise $800 to $30,000 for a married couple filing jointly.

For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from 2024.

Adjusted Rates

Marginal rates. The top marginal rate of 37% will apply to income above $626,350 for an individual or $751,600 for a couple. Other rates:

  • 35% for incomes over $250,525 ($501,050 for married couples filing jointly)
  • 32% for incomes over $197,300 ($394,600 for married couples filing jointly)
  • 24% for incomes over $103,350 ($206,700 for married couples filing jointly)
  • 22% for incomes over $48,475 ($96,950 for married couples filing jointly)
  • 12% for incomes over $11,925 ($23,850 for married couples filing jointly)
  • 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly)

Alternative minimum tax exemption amounts. 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.

Earned income tax credits. For qualifying taxpayers who have three or more qualifying children, the maximum Earned Income Tax Credit amount will be $8,046, an increase from $7,830.

Qualified transportation fringe benefit. The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, up from $315.

Health flexible spending cafeteria plans. The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases $100 to $3,300. For plans that permit the carryover of unused amounts, the maximum carryover amount rises $20 to $660.

Medical savings accounts. For participants who have self-only coverage, the plan must have an annual deductible that is not less than $2,850 (a $50 increase), but not more than $4,300 (an increase of $150). The maximum out-of-pocket expense amount rises $150 to $5,700. For family coverage, the annual deductible is not less than $5,700, increasing from $5,550. The deductible cannot be more than $8,550, an increase of $200. For family coverage, the out-of-pocket expense limit is $10,500, up from $10,200.

Foreign earned income exclusion. The foreign earned income exclusion increases $3,500 to $130,000.

Estate tax credits. Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, up from $13,610,000.

Annual exclusion for gifts. This increases $1,000 to $19,000.

Adoption credits. The maximum credit allowed for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, an increase of $470.

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