Tax Season 2025: What You Need to Know
As the new year approaches, taxpayers across the country are gearing up to file their taxes in 2025. To help ease the process, the Internal Revenue Service (IRS) releases annual inflation adjustments, affecting over 60 tax provisions. Last year, the IRS announced the numbers for tax year 2024, and it’s essential to understand the changes before filing.
Standard Deduction Increases
For tax year 2024, the standard deduction for single taxpayers and married individuals filing separately rose to $14,600, a $750 increase from the previous year. Married couples filing jointly saw their deduction increase to $29,200, up $1,500. Heads of household can expect a standard deduction of $21,900, a $1,100 increase.
Tax Brackets for 2024
The IRS also announced the tax rates for its seven tax brackets for tax year 2024:
- 37%: Single income over $609,350 and married couples filing jointly with income over $731,200
- 35%: Single income over $243,725 and married couples filing jointly with income over $487,450
- 32%: Single income over $191,950 and married couples filing jointly with income over $383,900
- 24%: Single income over $100,525 and married couples filing jointly with income over $201,050
- 22%: Single income over $47,150 and married couples filing jointly with income over $94,300
- 12%: Single income over $11,600 and married couples filing jointly with income over $23,200
- 10%: Single income of $11,600 or less and married couples filing jointly with income less than $23,200
Alternative Minimum Tax Exemption
The alternative minimum tax (AMT) exemption amount for tax year 2024 increased to $85,700, with a phase-out starting at $609,350. For married couples filing jointly, the exemption amount rose to $133,300, with a phase-out beginning at $1,218,700.
Earned Income Tax Credit and Health Savings Accounts
The maximum Earned Income Tax Credit amount for taxpayers with three or more qualifying children increased to $7,830 for tax year 2024. Additionally, the limit for employee health savings account contributions will rise to $3,200, and the out-of-pocket expense limits for medical savings accounts will increase to $5,550 for self-only coverage and $10,200 for family coverage.
Looking Ahead to Tax Year 2025
In October, the IRS released information on changes impacting taxpayers for tax year 2025. Key takeaways include:
- Standard deductions will increase to $15,000 for single taxpayers and married individuals filing separately, $30,000 for married couples filing jointly, and $22,500 for heads of households.
- Tax brackets will also see adjustments, with the top rate applying to single income over $626,350 and married couples filing jointly with income over $751,600.
- The maximum Earned Income Tax Credit amount for qualifying taxpayers with three or more qualifying children will rise to $8,046.
Stay informed and plan ahead to ensure a smooth tax filing experience in 2025.
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