The Internal Revenue Service (IRS) has released the final guidelines for the 2025 tax year and many Americans will be pleased with some of the changes. While taxes are not usually people’s favorite discussion topic, it is paramount to stay informed and involved as we all have to pay them in some way and ignorance is not bliss if you get hit with an enormous tax bill that could have been avoided with just a little care.
IRS changes in deductions for 2025
The first change many Americans will be happy to learn is a change in the standard deduction amount. Taxpayers do not have to pay taxes on all of their income. They only have to pay taxes on their taxable income, which is their total income minus the accepted deductions.
These deductions can be itemized or standard and there are pros and cons for both. As the IRS explains:
The standard deduction “is a flat amount based on your filing status (single; married filing separately; married filing jointly; head of household; or qualifying surviving spouse). Taxpayers aged 65 and older and blind taxpayers may get an additional deduction.”
Itemized deductions work best for taxpayers “if the total amount of your allowable itemized deductions is greater than your standard deduction or if you must itemize deductions because you can’t use the standard deduction. You may also want to itemize deductions if your standard deduction is limited because another taxpayer claims you as a dependent. Itemized deductions, subject to certain dollar limitations, include amounts you paid, during the taxable year, for state and local income or sales taxes, real property taxes, personal property taxes, mortgage interest, disaster losses, gifts to charities, and medical and dental expenses.”
In general, the IRS adjusts the standard deduction each year for inflation, but the itemized deductions have not changed. Taxpayers have the choice of which they want to file, taking into account that there are some conditions that they would have to meet regardless of which one they choose.
The IRS website illustrates the limitations of the standard deduction by explaining that you cannot take one if:
- You are a married individual filing as married filing separately whose spouse itemizes deductions.
- You are an individual who files a tax return for a period of less than 12 months because of a change in your annual accounting period.
- You were a nonresident alien or a dual-status alien during the year. However, nonresident aliens who are married to a U.S. citizen or resident alien at the end of the year and who choose to be treated as U.S. residents for tax purposes can take the standard deduction.
- You are filing as an estate or trust, common trust fund, or partnership.
Those who fit into those categories must file itemized deductions.
So, with that being said, what are the changes in standard deductions? Single taxpayers and married people filing separately will be able to access a standard deduction of $15,000 in 2025. This is an increase benefit of $400 compared to the previous year. For married couples filing jointly, the number goes up to $30,000, marking an increase of $800 and for heads of household, the amount rises to $22,500, exceeding the figure of the previous year by $600.
Another important change is to the Alternative minimum tax exemption amounts, which apply to taxpayers with high economic income and tax benefits that can reduce their tax bill by setting a limit on those benefits and helping to ensure that those taxpayers pay at least a minimum amount of tax. In 2025 the exemption amount for unmarried individuals will increase to $88,100 ($68,650 for married individuals filing separately) and will begin to phase out at $626,350. For married couples filing jointly, the exemption amount
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will increase to $137,000 and begins to phase out at $1,252,700.
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