The IRS has announced the annual inflation adjustments for the 2025 tax year, which reflect on average a 2.8% increase for the standard deduction as well as the various income level thresholds used to determine marginal tax rates.
The changes announced by the IRS on Tuesday represent the smallest inflation adjustment since 2021. The IRS made more sizeable adjustments in 2024 and 2023, averaging 5.4% and 7.1%, respectively, when U.S. inflation was running higher.
Taxpayers will use these new inflation-adjusted deductions and income tax brackets when they file their 2025 taxes early in the 2026 calendar year. Here are the most significant changes:
Standard deduction. For single taxpayers and married individuals filing separately, the standard deduction rises to $15,000 for tax year 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.
Marginal rates. For tax year 2025, the top tax rate remains 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).
Alternative minimum tax exemption amounts. For tax year 2025, the 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.
Earned income tax credits. For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit (EITC) amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
Qualified transportation fringe benefit. For tax year 2025, 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.
Health flexible spending cafeteria plans. For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
Medical savings accounts. For tax year 2025, participants who have self-only coverage the plan must have an annual deductible that is not less than $2,850 (a $50 increase from the previous tax year), but not more than $4,300 (an increase of $150 from the previous tax year). The maximum out-of-pocket expense amount rises to $5,700, increasing from $5,550 in tax year 2024.
For family coverage plans in tax year 2025, the annual deductible is not less than $5,700, increasing from $5,550 in tax year 2024. However, the deductible cannot be more than $8,550, an increase of $200 versus the limit for tax year 2024. For family coverage, the out-of-pocket expense limit is $10,500 for tax year 2025, rising from $10,200 in tax year 2024.
Foreign earned income exclusion. For tax year 2025, the foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.
Estate tax credits. Estates of decedents who die during 2025 have a basic exclusion amount of $13.990 million increased from $13.61 million in 2024.
Annual Gift Exclusion. Annual exclusion for gifts increases to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
Adoption credits. 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, increased from $16,810 for tax year 2024.
For more information on the 2025 IRS income tax rate tables and annual inflation adjustments, go here.
