The 2025 tax season officially begins on January 27, and taxpayers should prepare for some key changes that could significantly affect their returns. From bigger standard deductions to expanded tax credits, here’s what you need to know to make sure you’re not leaving money on the table.
Higher Standard Deductions = Bigger Potential Refunds
The IRS has increased the standard deduction for 2025 to help taxpayers reduce their taxable income:
- Single filers can now claim $15,000, up $400 from last year.
- Married couples filing jointly will get a $30,000 deduction, $800 more than in 2024.
- Heads of household can deduct $22,500, an increase of $600.
If you don’t itemize deductions, this increase could put more money back in your pocket by lowering your overall taxable income.
Tax Brackets Adjusted for Inflation
The tax rates themselves haven’t changed, but the income brackets have been adjusted to account for inflation. The top rate of 37% will apply to single filers earning over $626,350 and joint filers with income over $751,600. But for most people, the adjusted brackets may mean lower taxes, depending on their income.
Alternative Minimum Tax (AMT) Changes
The AMT, which ensures higher earners pay a minimum amount of tax, has higher exemption limits this year. Single filers will see their exemption increase to $88,100, while married couples filing jointly will get a $137,000 exemption.
If you’re a high earner, you’ll want to review your income and deductions to see if this impacts you.
Boost to Earned Income Tax Credit
Good news for low- to moderate-income working families: The maximum Earned Income Tax Credit (EITC) for families with three or more qualifying children is now $8,046. This increase from last year could provide much-needed relief for eligible households.
Retirement Savings Limits Increased
If you’re contributing to a 401(k), you can now put away up to $23,500 in 2025, $500 more than last year. This increase allows you to save more for retirement while enjoying tax advantages.
Estate and Gift Tax Updates
The federal estate tax exemption has jumped to $13.99 million per individual, up from $13.61 million in 2024. Additionally, the annual gift tax exclusion now sits at $19,000. This provides greater flexibility for individuals planning to transfer wealth to loved ones without facing heavy taxes.
IRS Services Get a Tech Upgrade
Filing your taxes should be a bit easier this year, thanks to ongoing modernization efforts by the IRS. They’ve introduced virtual assistants, expanded online account options, and made tax forms accessible on mobile devices. These changes aim to provide better support and faster responses to taxpayers.
Potential Tax Law Changes on the Horizon
While the 2025 tax season is underway, it’s important to keep an eye on legislative developments. Key provisions from the 2017 Tax Cuts and Jobs Act are set to expire at the end of 2025, and lawmakers are debating what will happen next. Depending on the outcome, this could affect future tax rates, deductions, and credits.
What You Should Do Now
As the tax season gets rolling, it’s important to gather your documents, stay on top of IRS updates, and consider consulting a tax professional if you’re unsure about any changes. With bigger deductions and expanded credits on the table, careful planning could mean a larger refund—or at least a lower tax bill.
