As the 2024 tax filing season approaches, it’s crucial for practitioners to also consider the 2025 tax numbers and IRS rates that will affect their clients in the coming year. In late October, the IRS released these figures through Revenue Procedure 2024-40, and we’ve highlighted the key points for your convenience.
Here’s a breakdown of the 2025 tax brackets according to different filing statuses:
- 10%
- Single: $0 – $11,925
- Married Filing Jointly: $0 – $23,850
- Married Filing Separately: $0 – $11,925
- Head of Household: $0 – $17,000
- 12%
- Single: $11,926 – $48,475
- Married Filing Jointly: $23,851 – $96,950
- Married Filing Separately: $11,926 – $48,475
- Head of Household: $17,001 – $64,850
- 22%
- Single: $48,476 – $103,350
- Married Filing Jointly: $96,951 – $206,700
- Married Filing Separately: $48,476 – $103,350
- Head of Household: $64,851 – $103,350
- 24%
These updated tax brackets are essential for planning and strategizing financial decisions for the upcoming year. Make sure to stay informed about these changes to better assist your clients.
Understanding the New IRS Tax Brackets for 2025
As we approach 2025, it’s essential to get acquainted with the updated tax brackets and standard deductions. These changes could significantly impact your financial planning. Let’s dive into the specifics of the new tax brackets and deductions.
IRS: New Income Tax Brackets
The income tax brackets for 2025 have been adjusted to accommodate inflation and other economic factors. Here’s a breakdown of the updated brackets:
- 32% Tax Bracket:
- Income between $103,351 and $197,300
- Income between $206,701 and $394,600
- 35% Tax Bracket:
- Income between $197,301 and $250,525
- Income between $394,601 and $501,050
- 37% Tax Bracket:
- Income over $626,350
- Income over $751,600
Enhanced Standard Deductions
The standard deduction for 2025 has been increased compared to 2024, providing more relief to taxpayers. Here are the details based on different filing statuses:
- Single:
- 2025: $15,000
- 2024: $14,600
- Married Filing Jointly:
- 2025: $30,000
- 2024: $29,200
- Married Filing Separately:
- 2025: $15,000
- 2024: $14,600
- Head of Household:
- 2025: $22,500
- 2024: $21,900
It’s crucial to learn about about these updates to make informed financial decisions. Understanding these changes can help you better prepare for your tax obligations in 2025.
The Earned Income Credit for 2025 has been updated to reflect inflation adjustments, offering crucial financial support to eligible individuals and families. Understanding these changes is essential for maximizing your benefits.
2025 Earned Income Credit Breakdown
The Earned Income Credit varies depending on the number of children you have. Here’s a clear breakdown of the updated amounts:
IRS: Earned Income Amount
- 1 Child: $12,730
- 2 Children: $17,880
- 3 or More Children: $17,880
- No Children: $8,490
Maximum Amount of Credit
- 1 Child: $4,328
- 2 Children: $7,152
- 3 or More Children: $8,046
- No Children: $649
IRS: Phaseout Thresholds
Understanding the phaseout thresholds is imperative for planning. These thresholds determine when the credit begins to phase out based on your filing status and income level.
Married Filing Jointly
- Threshold Phaseout Amount: $30,470
- Completed Phaseout Amount:
- 1 Child: $57,554
- 2 Children: $64,430
- 3 or More Children: $68,675
- No Children: $26,214
All Other Filing Statuses
- Threshold Phaseout Amount: $23,350
- Completed Phaseout Amount:
- 1 Child: $50,434
- 2 Children: $57,310
- 3 or More Children: $61,555
- No Children: $19,104
IRS: Estate and Gift Tax Updates
In addition to the Earned Income Credit, significant changes have been made to the estate and gift tax for 2025:
- Basic Exclusion for Decedents: $13,990,000
- Annual Gift Tax Exclusion for Individuals: $19,000
These updates can have a substantial impact on your financial planning, so it’s vital to stay informed and consult with a financial advisor if needed.