The cost of living adjustments and tax changes for 2025 were released by the IRS in Revenue Procedure 2024-40 (PDF) and Notice 2024-80 (PDF).
In 2025, the income tax brackets will experience a 2.8% adjustment, representing the most modest increase since 2021. Summarized below are the adjustments we feel will be of most interest to our readers. The figures reflected in this article are as of the October 22, 2024, and November 1, 2024, release dates. To the extent any additional changes are introduced, we will update this article and the reference dates so you can be sure you have the most current information.
Highlights of Adjustments for 2025
| STANDARD DEDUCTION |
|
2024 |
2025 |
Change |
| Married Filing Jointly1 |
$29,200 |
$30,000 |
$800 |
| Single2 and Married Filing Separately1 |
$14,600 |
$15,000 |
$400 |
| Head of Household2 |
$21,900 |
$22,500 |
$600 |
1 A married filer who is blind or over age 65 can claim an additional $1,600. Two married filers who are both over age 65 or blind can claim $3,200, up $100 from 2024.
2 Single or head-of-household filers who are blind or over age 65 can claim an additional $2,000 standard deduction, up $50 from 2024.
| ESTATE & GIFT TAX |
|
2024 |
2025 |
Change |
| Annual Exclusion Gifts |
$18,000 |
$19,000 |
$1,000 |
| Estate and Gift Tax Basic Exclusion |
$13,610,000 |
$13,990,000 |
$380,000 |
| Generation Skipping Exemption |
$13,610,000 |
$13,990,000 |
$380,000 |
| OTHER ADJUSTMENTS |
|
2024 |
2025 |
Change |
| Long Term Capital Gains Rate Brackets (Married Filing Jointly) |
0% – up to $94,050 |
0% – up to $96,700 |
0% – $2,650 |
| 15% – up to $583,750 |
15% – up to $600,050 |
15% – $16,300 |
| 20% – $583,751 and above |
20% – $600,051 and above |
|
| Dependent Unearned Income Subject to Parent’s Marginal Rate (“Kiddie Tax”) |
Above $2,600 |
Above $2,700 |
$100 |
| Health/Medical Savings Account Contribution Limit |
$4,150 (self only) |
$4,300 (self only) |
$150 (self only) |
| $8,300 (family) |
$8,550 (family) |
$250 (family) |
| Cafeteria plans (Flexible Spending Account) Maximum Contributions |
$3,200 |
$3,300 |
$100 |
| Qualified Charitable Distribution Limit (for IRAs) |
$105,000 |
$108,000 |
$3,000 |
| Foreign Earned Income Exclusion |
$126,500 |
$130,000 |
$3,500 |
| Qualified Business Income (Section 199A) Deduction Threshold |
$383,900 married filing jointly |
$394,600 married filing jointly |
$10,700 |
| FEDERAL INCOME TAX RATE SCHEDULES |
| MARRIED FILING JOINTLY & SURVIVING SPOUSES |
|
2025 |
2025 Tax is This Amount Plus this Percentage |
Of the Amount Over |
| 10% |
Income up to $23,850 |
$0 plus 10% |
$0 |
| 12% |
$23,851 to $96,950 |
$2,385 plus 12% |
$23,850 |
| 22% |
$96,951 to $206,700 |
$11,157 plus 22% |
$96,950 |
| 24% |
$206,701 to $394,600 |
$35,302 plus 24% |
$206,700 |
| 32% |
$394,601 to $501,050 |
$80,398 plus 32% |
$394,000 |
| 35% |
$501,051 to $751,600 |
$114,462 plus 35% |
$501,050 |
| 37% |
Income over $751,601 |
$202,154.50 plus 37% |
$751,600 |
| FEDERAL INCOME TAX RATE SCHEDULES |
| SINGLE TAXPAYERS |
|
2025 |
2025 Tax is This Amount Plus this Percentage |
Of the Amount Over |
| 10% |
Income up to $11,925 |
$0 plus 10% |
$0 |
| 12% |
$11,926 to $48,475 |
$1,192.50 plus 12% |
$11,952 |
| 22% |
$48,476 to $103,350 |
$5,578.50 plus 22% |
$48,475 |
| 24% |
$103,351 to $197,300 |
$17,651.00 plus 24% |
$103,350 |
| 32% |
$197,301 to $250,525 |
$40,199.00 plus 32% |
$197,300 |
| 35% |
$250,526 to $626,350 |
$57,231.00 plus 35% |
$250,525 |
| 37% |
Income over $626,351 |
$188,769.75 plus 37% |
$626,350 |
Contribution limits for Traditional IRAs, Roth IRAs, and IRA and Elective Deferral Plan catch-up contributions are all indexed to inflation. However, the IRA contribution and catch-up contribution limits remain unchanged for 2025. There was no change to the Elective Deferral catch-up contribution limits for individuals over age 50. However, starting in 2025, there will be new catch-up contribution limits into elective deferral plans for individuals age 60–63.
For 2025, adjustments were also made to the elective deferral contribution limits and the AGI Phase-Outs for Roth contributions and deductible IRA contributions. The updated limits and Phase-Outs are below.
| CONTRIBUTION LIMITS1 |
|
2024 |
2025 |
Change |
| Elective Deferral Catch-Up Contributions (age 60-63) |
New for 2025 |
$11,250 |
$11,250 |
| Elective Deferral Plans2,3 |
$23,000 |
$23,500 |
$500 |
1 Check with your advisor for the limits applicable to SEP, SIMPLE, and defined contribution plans.
2 Catch-up contributions are available for anyone over age 50
3 Elective deferral plans include 401(k) plans, 403(b) plans, most 457 plans, and Thrift Savings plans
| AGI PHASE-OUT |
| ROTH IRA CONTRIBUTIONS |
| Single/Head of Household |
$150,000 to $165,000 |
| Married Filing Joint |
$236,000 to $246,000 |
| AGI PHASE-OUT |
| DEDUCTIBLE IRA CONTRIBUTIONS |
| Single/Head of Household |
$79,000 to $89,000 |
| Married Filing Separate* (not subject to an annual COLA adjustment) |
$0 to $10,000 |
| Married Filing Joint (active spouse) |
$126,000 to $146,000 |
| Married Filing Joint (non-active spouse) |
$236,000 to $246,000 |
There are many other cost-of-living adjustments for 2025 which may impact you. Review Revenue Procedure 2024-40 (PDF) and Notice 2024-80 (PDF) and consult your CPA to see if there are others you need to be aware of for your specific situation.
This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.
The Trump Trade
November 25, 2024The cost of living adjustments and tax changes for 2025 were released by the IRS in Revenue Procedure 2024-40 (PDF) and Notice 2024-80 (PDF).
In 2025, the income tax brackets will experience a 2.8% adjustment, representing the most modest increase since 2021. Summarized below are the adjustments we feel will be of most interest to our readers. The figures reflected in this article are as of the October 22, 2024, and November 1, 2024, release dates. To the extent any additional changes are introduced, we will update this article and the reference dates so you can be sure you have the most current information.
Highlights of Adjustments for 2025
1 A married filer who is blind or over age 65 can claim an additional $1,600. Two married filers who are both over age 65 or blind can claim $3,200, up $100 from 2024.
2 Single or head-of-household filers who are blind or over age 65 can claim an additional $2,000 standard deduction, up $50 from 2024.
Contribution limits for Traditional IRAs, Roth IRAs, and IRA and Elective Deferral Plan catch-up contributions are all indexed to inflation. However, the IRA contribution and catch-up contribution limits remain unchanged for 2025. There was no change to the Elective Deferral catch-up contribution limits for individuals over age 50. However, starting in 2025, there will be new catch-up contribution limits into elective deferral plans for individuals age 60–63.
For 2025, adjustments were also made to the elective deferral contribution limits and the AGI Phase-Outs for Roth contributions and deductible IRA contributions. The updated limits and Phase-Outs are below.
1 Check with your advisor for the limits applicable to SEP, SIMPLE, and defined contribution plans.
2 Catch-up contributions are available for anyone over age 50
3 Elective deferral plans include 401(k) plans, 403(b) plans, most 457 plans, and Thrift Savings plans
There are many other cost-of-living adjustments for 2025 which may impact you. Review Revenue Procedure 2024-40 (PDF) and Notice 2024-80 (PDF) and consult your CPA to see if there are others you need to be aware of for your specific situation.
This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.
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