KEY TAKEAWAYS
- The IRS has adjusted its 2025 tax brackets and increased amounts for the standard deduction and several other items to reflect inflation.
- Some individuals with a 401(k) account can contribute more in 2025. Catch-up contributions for individuals aged 60 to 63 will also increase next year.
- New rules and contribution limits for health care plans have been updated for 2025, and experts recommend reflecting back on your 2024 tax situation to make a proper plan for the next year.
You may have just started thinking about your 2024 taxes, which are due next April, but the Internal Revenue Service (IRS) has already announced changes for the 2025 tax year that will affect how you file in 2026.
Here’s how the 2025 changes compare to the current rules.
How Tax Brackets and Standard Deduction Will Change
To keep up with inflation, the IRS increased the amounts for the standard deduction, Alternative Minimum Tax (AMT), and Earned Income Tax Credits, among several other items.
The Standard Deduction for 2025 will increase by $400 to $15,000 for single filers and married filing separately and to $30,000 for married couples filing jointly. The AMT exemption threshold for unmarried filers will rise to $88,100 from $85,700, and for married taxpayers, it will increase by $3,700 to $137,000. Earned income tax credits are also set to increase by $216.
Tax brackets were also adjusted so taxpayers would pay the same proportion of their income regardless of inflation changes. Unless you get a 2.8% raise next year, your income won’t be taxed at a higher rate.
Some People Can Contribute More To Retirement Plans Next Year
Individuals with a 401(k) account will be able to contribute $500 more to their retirement plan as the contribution cap has been raised, although limits for Individual Retirement Account (IRA) remain the same.
The catch-up contribution limit, which allows individuals over the age of 50 to make higher additional contributions to their retirement accounts, remains the same. However, starting in 2025, individuals aged 60 to 63 can make contributions of up to $11,250, which is $3,750 higher than other catch-up contributions caps.
