Are You Ready? Major Overhauls to 2025 Tax Deductions

Author: Christina Drury
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Each year, the IRS reviews its tax figures and adjusts them as necessary for inflation. That often results in changes to the tax brackets and the deductions.

Next year is no exception. In late October, the IRS released its new adjustments in several different categories and it can help taxpayers prepare for the year ahead.

According to the IRS website, these are the changes to expect in 2025.

Tax Bracket Changes

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As is usual, the IRS has also adjusted the income brackets, increasing the income in each tax rate. For example, in 2024, single filers making up to $11,600 fell into the 10% tax rate. In 2025, that goes up to $11,925.

The max tax rate, 37%, also increased. In 2024, single filers making over $609,350 fell into this bracket. In 2025, that will apply to single filers making more than $626,350.

Standard Deduction

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When you file your taxes, you have the opportunity to claim standard or itemized deductions. Unless you have a lot of write-offs, it’s usually safe to claim the standard.

In 2025, the standard deduction for single and married filing separate taxpayers will be $15,000. Married couples filing a joint return will see theirs rise to $30,000 and the rate for head of households will be $22,500.

Alternative Minimum Tax Exemptions

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High earners often use tax benefits to reduce their taxable income. The alternative minimum tax sets a limit on those particular benefits so people pay a minimum tax amount.

In 2024, that figure was $85,700 for single filers and $133,300 for married couples. Those figures rise to $88,100 and $137,000, respectively. The phase-out amount begins at $626,350 for single filers and $1,252,700 for married couples.

Earned Income Tax Credits

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The earned income tax credit (EITC) is a refundable credit to low- and middle-income workers, particularly those who have children.

In 2024, the range was $632 to $7,830, depending on the number of children or dependants. The maximum allowable amount increases in 2025 to $8,046, a $216 change.

Medical Savings Accounts

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These are special savings accounts provided by Medicare to help low-income earners pay for their healthcare expenses. In 2024, their annual deductible couldn’t be less than $2,800 or more than $4,150. Those figures increased $50 and $150, respectively to $2,850 and $4,300.

Additionally, the maximum amount someone could pay out of pocket increases from $5,550 to $5,700. Changes to family coverage include a deductible of not less than $5,700 and not more than $8,550, an increase of $150 and $200.

Other Important Deductions

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Other deductions and exemptions that increase for 2025 include:

  • Foreign earned income exclusion to $130,000 from $126,500
  • Estate tax basic inclusion amounts to $13,990,000 from $13,610,000
  • Annual exclusion for gifts to $19,000 from $18,000
  • Adoption credits for children with special needs to $17,280 from $16,810
  • Qualified transportation fringe benefit to $325 from $315
  • Dollar limitations of contributions to health flexible spending cafeteria plans to $3,300 from $3,200. Additionally, maximum carryover amount increases to $660 from $640

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