The Internal Revenue Service has released the annual tax inflation adjustments for 2025. For detailed information on adjustments and changes that will impact taxpayers when filing their 2026 tax return, please read the Revenue Procedure 2024-40.

According to the Internal Revenue Service, there are several notable adjustments for 2025. Some of the changes of interest to many taxpayers are as follows:

• Standard deductions. For single taxpayers and married individuals filing separately for 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from 2024. For heads of households, the standard deduction will be $22,500 for 2025, an increase of $600 from the amount for 2024.
• Marginal rates. For 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:
  o 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
  o 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
  o 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
  o 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
  o 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
  o 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
• Alternative minimum tax exemption amounts. For 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 with three or more qualifying children, the 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.

On the other hand, certain items will remain unchanged for 2025:

• Personal exemptions. Exemptions for 2025 remain at 0, as in 2024. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017.
• Itemized deductions. There is no limitation on itemized deductions for 2025, as in 2024 and preceding, to 2018. The limitation on itemized deductions was eliminated by the Tax Cuts and Jobs Act of 2017.
• Lifetime learning credits. The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in Sec. 25A(d)(1) of the Internal Revenue Code is not adjusted for inflation for taxable years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

To read the news release posted on October 22,2024, please visit the Internal Revenue Service website here.