The IRS on Tuesday provided its annual inflation adjustments for over 60 tax provisions in tax year 2025, including increases in the standard deduction for married couples and single individuals.
These adjustments generally apply to tax returns that will be filed in 2026. Rev. Proc. 2024-40 provides details about these annual adjustments and also includes new tax rate schedules.
The standard deduction for married couples filing jointly for tax year 2025 increases to $30,000, up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $15,000 for tax year 2025, up $400. For heads of household, the standard deduction will be $22,500 for tax year 2025, up $600 from the amount for tax year 2024.
Income rate brackets
For tax year 2025, the top tax rate is 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).
The other rates are:
- 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).
Other adjustments
The IRS said that for tax year 2025, the alternative minimum tax 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.
The maximum earned income tax credit (EITC) for qualifying taxpayers who have three or more qualifying children will be $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing the maximum EITC amount for other categories, income thresholds, and phaseouts.
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.
For tax years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, a $100 increase from the previous year. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
For participants who have self-only coverage in a medical savings account, the plan must have an annual deductible of not less than $2,850, up $50 from tax year 2024, but not more than $4,300, up $150 from tax year 2024. For self-only coverage, the maximum out-of-pocket expense amount is $5,700, up $150 from tax year 2024. For family coverage in tax year 2025, the annual deductible is not less than $5,700, up $150 from tax year 2024; however, the deductible cannot be over $8,550, up $200 from tax year 2024. For family coverage, the out-of-pocket expense limit is $10,500, up $300 from tax year 2024.
The foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.
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.
The annual exclusion for gifts increases to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
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, an increase from $16,810 for tax year 2024.