2025 IRS Inflation Updates: Changes for the New Tax Year

November 5, 2024

Here’s a quick overview of the key changes to help you navigate the new thresholds and deductions in 2025.

Highlights of 2025 Adjustments

Tax Brackets:

The top marginal tax rate of 37% now applies to single filers earning over $626,350 and married couples filing jointly over $751,600.

Capital Gains Rates:

The 0% capital gains rate applies to single filers with taxable income up to $48,350 and married couples filing jointly up to $96,700.
The 15% rate applies to incomes up to $533,400 for single filers and $600,050 for joint filers.
The 20% rate is for incomes above these thresholds.

Earned Income Credit (EIC):

The maximum EIC for those with three or more children is now $8,046.
The phase-out starts at $23,350 for single filers and $30,470 for married couples, with a complete phase-out at $61,555 for singles and $68,675 for couples.

Health Coverage Credit:

Updated income thresholds apply to the refundable credit for coverage under a qualified health plan.

Alternative Minimum Tax (AMT):

AMT exemption for single filers is now $88,100, phasing out at $626,350.
Married couples filing jointly have an exemption of $137,000, with a phase-out at $1,252,700.

Educator Expense Deduction:

The deduction limit for qualified educators remains capped at $300.

Standard Deduction Adjustments:

The standard deduction has increased to $15,000 for single filers and $30,000 for married couples filing jointly.

Qualified Business Income (QBI) Deduction:

The QBI deduction phase-out range now begins at $197,300 for single filers and $394,600 for joint filers.

Foreign Earned Income Exclusion:

The maximum exclusion for foreign earned income has risen to $130,000 for 2025.

As always, reach out with any questions about how these changes may impact your financial planning.

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