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2025 Tax Updates: Key Changes to Know Now Thumbnail

2025 Tax Updates: Key Changes to Know Now

Taxes

The IRS recently announced adjustments to income tax brackets, the standard deduction, and retirement contribution limits for the 2025 tax year. While these updates won’t affect filings right away, understanding what’s ahead can be beneficial for planning purposes.

Tax Bracket AdjustmentsTax brackets for 2025 have increased to account for inflation, following adjustments based on the Consumer Price Index. Although the top federal tax rate remains at 37%, the Tax Cuts and Jobs Act of 2017 is set to expire at the end of 2025, potentially impacting future tax rates.

Standard Deduction Changes

  • Married couples filing jointly: $30,000 (an $800 increase)
  • Single filers: $15,000 (a $400 increase)

These increases in the standard deduction can help reduce taxable income, making proactive tax planning valuable for the coming years.

Marginal Rates on the Rise

Marginal tax rates are also adjusted upward, meaning certain income levels will be taxed at slightly higher rates due to inflation-based adjustments.

Gift Tax Exclusion

The annual gift tax exclusion has risen to $19,000, up $1,000 from the previous year. This allows individuals to gift up to $19,000 per recipient in 2025 without triggering federal gift tax.

Estate Tax Credit Increase

For individuals receiving inheritances in 2025, the estate tax exclusion has increased to $13,990,000, up from $13,610,000. This adjustment allows more of an estate’s value to be passed on to beneficiaries without federal estate tax.

State-Level Considerations

While the IRS has highlighted these federal changes, be aware that individual states may have their own tax updates. Residents of states with no state income tax, such as Alaska, Florida, and Texas, won’t see state-level changes, but those in other states may want to check for updates.

Planning Ahead

These changes are designed to reflect inflation and help manage tax burdens, but as always, tax planning is unique to each individual’s situation. Consider consulting with a tax professional to maximize the benefits of these updates. For more details, reach out to our office, where we’re happy to discuss what these adjustments could mean for your financial plans in 2025.

Information sourced from IRS.gov. This summary is for informational purposes only and not intended as tax advice. Please consult a tax professional for specific guidance.