Taxes are an unpleasant reality for most adults, and since the tax code is always evolving, it can be hard to keep up with all the changes the Internal Revenue Service (IRS) implements every year to ensure it keeps current, 2025 will be no exception and there have been a few changes announced already that taxpayers should really take into account before the beginning of the year.
These changes will affect how much you pay, or save in taxes and reflect the change in cost of living, which can benefit most regular Americans. The changes encompass increases in standard deductions, tax bracket thresholds, adoption related expenses, commuting, and earning income from outside the country.
With more than 60 changes coming, it can be very hard to keep up, and the help from tax professionals can be invaluable in cases where your returns are complex or you are in a high tax bracket, but for middle to low income families there are nine main changes that should be taken into account.
The new changes implemented by the IRS
The standard deduction amount will be going up in 2025. Most Americans do not choose to itemize their deductions as the standard deduction will always be more favorable to the average taxpayer. This deduction helps offset the persistent effects of inflation and put some money in taxpayers’ pocket, which is why it is a good thing that in 2025 single taxpayers can now deduct $15,000 and married couples filing jointly get a bump to $30,000, while heads of households can claim $22,500.
The Alternative Minimum Tax exemption, designed to ensure that high earners pay a minimum tax, has increased to $88,100 for individuals and $137,000 for joint filers, which may not be as good news for higher earners, but middle income earners may be spared in this tax cycle.
Income tax brackets have also been adjusted to account for rising wages, which helps keep taxpayers from paying more as their salary increases along with the cost of living. Th only income tax bracket not adjusted by the IRS has been the 37% top tax rate for single earners.
The monthly allowance for transportation and parking for those who receive employer-sponsored benefits has been raised to $325. This helps commuters in urban areas where the transportation costs are high.
Health flexible savings accounts will also see an increase in allowed contributions, with the maximum amount of $3,300 of pre tax income being deposited in them.
U.S., Americans working in other countries will also see an increase in their exclusion income up to $130,000 of foreign-earned income, minimizing their chance of double taxation.
The maximum earned income tax credit for low- to moderate-income families with three or more children rises to $8,046, in 2025, helping to support working families to make ends meet amidst rising inflation.
The estate tax exclusion jumps to $13.99 million, although those with large fortunes may want to check the future of this tax, as the provision ends in 2026 and after that if no legislation is passed, levels will go back down to pre-2018 levels.
And last, but by no means least, new parents will have a little more help when starting their adoption journey, the maximum adoption credit increased to $17,280 to help them cover qualified expenses, reducing the financial burden associated with adoption.
All of these changes and more can be found in the IRS website, this means that if you think there may be a change pertaining to your own taxes, you should review the specific section that details the credit. This way you will be up to date with the latest change and you will be able to adjust your behavior accordingly.
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