The IRS has released its annual inflation adjustments for tax year 2025. These changes, effective when filing in 2026, are designed to help taxpayers by aligning thresholds and limits with inflation. Here’s a full breakdown of the key updates and what they mean for your tax planning.

Standard Deduction Increases

• Single & Married Filing Separately: $15,000 (up $400)
• Married Filing Jointly: $30,000 (up $800)
• Head of Household: $22,500 (up $600)

Higher deductions mean lower taxable income for many taxpayers.

Marginal Tax Rate Adjustments

The rates remain the same, but income thresholds increase:

• 10%: Up to $11,925 (single) / $23,850 (married)
• 12%: Over $11,925 (single) / $23,850 (married)
• 22%: Over $48,475 (single) / $96,950 (married)
• 24%: Over $103,350 (single) / $206,700 (married)
• 32%: Over $197,300 (single) / $394,600 (married)
• 35%: Over $250,525 (single) / $501,050 (married)
• 37%: Over $626,350 (single) / $751,600 (married)

Earned Income Tax Credit (EITC)

The maximum EITC rises to $8,046 (up from $7,830 in 2024), providing additional relief for low- and moderate-income families.

Qualified Transportation & Health Benefits

• Qualified Transportation Benefits: $325/month (up from $315)
• Health FSA Limit: $3,300 (up from $3,200), with a $660 carryover (up from $640)
• Medical Savings Accounts: Deductible and out-of-pocket limits increase for 2025

Medical Savings Accounts (MSAs) will see both deductible and out-of-pocket limits go up in 2025, making it easier for families to budget for medical expenses:

Other Important Adjustments

• Foreign Earned Income Exclusion: $130,000 (up from $126,500)
• Estate Tax Exemption: $13,990,000 (up from $13,610,000)
• Gift Exclusion: $19,000 per recipient (up from $18,000)
• Adoption Credit: $17,280 (up from $16,810)

Unchanged for 2025

• Personal Exemptions: Still $0 (unchanged since 2018)
• Itemized Deduction Limits: None, as per the Tax Cuts and Jobs Act
• Lifetime Learning Credit: Phases out above $80,000 (single) / $160,000 (joint), no inflation adjustments

From higher deductions to expanded credits, these changes could lower your tax bill or increase benefits. Consider them in your 2025 tax planning strategy to take full advantage.

Contact Grants Pass Tax Service to learn how these adjustments may affect your unique financial situation.