New Tax brackets and deductions for 2025
An Overview of Tax Brackets, Deductions, and Credits Impacting Your 2025 Tax Planning
In an effort to keep pace with changes in the cost of living, the IRS annually adjusts over 60 tax provisions for inflation. For the 2025 tax year, which you’ll file in 2026, these adjustments, including the federal income tax brackets, saw an average increase of about 2.8%.
Key Takeaways
What’s the new standard deduction for 2025?
The 2025 standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.
What are the 2025 gift tax exclusion amounts?
In 2025, you can gift up to $19,000 per person tax-free, with a $190,000 exclusion for gifts to a non-citizen spouse.
Has the child tax credit changed for 2025?
Yes, the refundable portion of the Child Tax Credit has increased to $1,700 per qualifying child, though the maximum credit remains $2,000.
New Tax Legislation
A comprehensive legislative package passed in July 2025 introduced new tax laws that are immediately effective. A key feature of this new law is the permanent establishment of several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were originally scheduled to expire at the end of 2025. These changes, unless otherwise noted, are effective for the 2025 tax year and may impact your tax planning.
Navigating New Tax Brackets, Deductions, and Credits for 2025
Briefly, the 2025 tax law introduces several changes to federal tax regulations. The seven tax brackets are now permanent. Key adjustments include an increase in the standard deduction, with a new bonus for older adults, and a higher child tax credit of $2,200 per qualifying child. The alternative minimum tax exemption thresholds have been reduced, and the SALT deduction cap has been temporarily increased, subject to income-based phaseouts.
2025 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
| Tax Rate | For Single Filers | For Married Individuals Filing Joint Returns | For Heads of Households |
|---|---|---|---|
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $68,450 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $68,451 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 |
| 35% | $250,526 to $626,350 | $501,050 to $751,600 | $250,501 to $626,350 |
| 37% | $626,350 or more | $751,600 or more | $626,351 or more |
2025 Standard Deduction and Personal Exemption
For 2025, the standard deduction will increase by $400 for single filers, bringing their total to $14,600. For married couples filing jointly, the deduction will rise by $800 to $29,200.
Additional Deductions for Seniors
Seniors aged 65 or older can claim an additional standard deduction. This is $2,000 for single filers and $1,600 for joint filers.
Personal Exemption
The personal exemption remains at $0 for 2025, a change that has been in place since the Tax Cuts and Jobs Act of 2017 (TCJA).
| Filing Status | Deduction Amount |
|---|---|
| Single | $15,000 |
| Married Filing Jointly | $30,000 |
| Head of Household | $22,500 |
2025 Alternative Minimum Tax
The alternative minimum tax (AMT) was created in the 1960s as a parallel tax system to ensure high-income individuals pay their fair share. It requires certain taxpayers to calculate their tax liability twice—once under the regular income tax system and again under the AMT—and pay the higher of the two amounts.
The AMT uses its own definition of taxable income, called alternative minimum taxable income (AMTI). While taxpayers can exempt a significant portion of their income from AMTI to prevent low- and middle-income individuals from being subject to this tax, this exemption gradually disappears for high-income earners. The AMT is levied at two rates: 26% and 28%.
For 2025, the AMT exemption is $88,100 for single filers and $137,000 for married couples filing jointly.
| Filing Status | Exemption Amount |
|---|---|
| Unmarried Individuals | $88,100 |
| Married Filing Jointly | $137,000 |
In 2025, the 28% Alternative Minimum Tax (AMT) rate applies to a taxpayer’s Alternative Minimum Taxable Income (AMTI) exceeding $239,100 (or $119,550 for married couples filing separately).
The AMT exemptions begin to phase out at a rate of 25 cents for every dollar of AMTI above $626,350 for single filers and $1,252,700 for married couples filing jointly.
2025 Alternative Minimum Tax (AMT) Exemption Phaseout Thresholds
| Filing Status | Threshold |
|---|---|
| Unmarried Individuals | $626,350 |
| Married Filing Jointly | $1,252,700 |
2025 Child Tax Credit
The maximum Child Tax Credit is $2,000 per qualifying child. This amount isn’t adjusted for inflation. The credit’s refundable portion, however, is adjusted for inflation and will be $1,700 in 2025.
2025 Capital Gains Tax Rates and Brackets (Long-Term Capital Gains)
Long-term capital gains are taxed at different rates and in different brackets than ordinary income.
2025 Capital Gains Tax Brackets
| Tax Rate | For Unmarried Individuals, Taxable Income Over | For Married Individuals Filing Joint Returns, Taxable Income Over | For Heads of Households, Taxable Income Over |
|---|---|---|---|
| 0% | $0 | $0 | $0 |
| 15% | $48,350 | $96,700 | $64,750 |
| 20% | $533,400 | $600,050 | $566,700 |
The Tax Cuts and Jobs Act of 2017 (TCJA) provides a 20% deduction for pass-through businesses. This deduction begins to phase out for single taxpayers with incomes exceeding $197,300 and for joint filers with incomes above $394,600 as of 2025.
2025 Qualified Business Income Deduction Thresholds
| Filing Status | Threshold |
|---|---|
| Unmarried Individuals | $197,300 |
| Married Filing Jointly | $394,600 |
2025 Annual Exclusion for Gifts
In 2025, the annual gift tax exclusion has increased to $19,000, up from $18,000. For gifts to a non-citizen spouse, the exclusion has also risen to $190,000, an increase from $185,000.
The Impact of Inflation and Legislative Actions
With new legislation and annual inflation adjustments, tax year 2025 presents important changes for taxpayers. Key adjustments include higher income thresholds for all seven tax brackets and an increase in the standard deduction. Additionally, provisions of the 2017 Tax Cuts and Jobs Act were made permanent, affecting areas like the child tax credit and the qualified business income deduction. While some thresholds have been raised to keep pace with inflation, others, like the Alternative Minimum Tax, may impact high-income earners differently. These changes underscore the importance of understanding the new regulations to effectively plan for your tax future.
Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.
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Matt’s background in federal, state, and local tax enables him to provide extensive services to the firm’s clients in the areas of tax compliance and consulting across a spectrum of industries.