The IRS just released yesterday, October 22, 2024 the annual adjustments to the marginal tax rates and many more adjustments that are relevant for taxpayers.
As we enter Tax Year 2025, we are all aware that the 2017 Tax Cuts & Jobs Act will sunset.
It will likely create a great deal of grandstanding and political theater for most of the 2025 year, regardless of the election results which we will know soon enough!
If you would like to see the full press release, here is the link to the IRS.gov site.
Here are a few highlights...
- Standard deductions. For single taxpayers and married individuals filing separately for tax year 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 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
Estate tax credits.Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.
Annual exclusion for gifts increasesto $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024
- 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 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
- 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 202
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 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.
If you would like to discuss your financial planning for year end, let's chat?
Schedule Here for a discussion around financial planning. Please note that Maverick Financial does not prepare tax returns and is not credentialed as a tax professional.
