New Year, New Rules: What’s Changing for the 2025 Tax Season?
The 2025 tax filing season kicked off on January 27. With it, it also brought a slew of changes for the year ahead. If you haven’t been keeping track of these changes, it’s high time that you learn about them before the April 15, 2025 deadline to file your taxes. Thankfully, most of the major changes are pretty straightforward to understand. This makes sure that you can quickly absorb these updates and move forward with filing your taxes without unnecessary delays in the process. To guide through this learning curve, here is a quick guide on what’s changing for the 2025 tax season.
Increase in Standard Deductions
One of the most important updates for the 2025 tax season is all about the increase in standard deductions. According to the Internal Revenue Service (IRS), single taxpayers and married individuals filing separately will have their standard deductions increased to $15,000. Married couples filing jointly will see these deductions climbing to $30,000. Whereas, heads of households will have standard deductions leveled up to $22,500. Knowing these updates lets you steer clear of the woes of tax debt burden and allows you to file your taxes without running into avoidable mistakes.
Increase in Alternative Minimum Tax (AMT) Exemption Amount
The alternative minimum tax (AMT) exemption amounts have also increased in the 2025 tax season. For single individuals, the exemption will increase to $88,100. For married individuals filing separately, this figure climbs up to $68,650. Both of these categories see the exemption start phasing out at $626,350. For married couples filing jointly, the AMT exemption will increase to $137,000 and start phasing out at $1,252,700. Any seasoned professional who uses solutions like Intuit Accountants can guide you through these changes.
Increase in Earned Income Tax Credit (EITC)
The maximum earned income tax credit (EITC) has also increased in the 2025 tax season from $7,380 to $8,046. This applies to qualifying taxpayers with three or more qualifying children. You can look into further guidelines provided by the IRS to calculate your exact EITC. With it, it may also do you well to use a tool like the YNAB app to properly manage your budget and funds. This is where you may also want to learn how to see the positives in having a tax debt burden.
Increase in Federal Estate Tax Exclusion Amount
Whether you inherit a new home that your loved one bought through the Zillow app or receive a significant portion of your family’s generational estate, you may need to pay a noticeable amount in federal estate tax in addition to hiring a lawyer to protect your legal rights. In the 2025 tax season, the taxes you owe through this inheritance could be reduced due to an increase in the federal estate tax exclusion amount: For estates of descendants who pass away in 2025, the exclusion amount will climb to $13,990,000.
Changes to Retirement Contributions and Income Thresholds
The 2025 tax season lets you save up higher amounts for your individual retirement account (IRA) by increasing the income phase-out threshold for Roth IRAs to be between $150,000-$165,000 for single individuals and heads of households. For married couples filing jointly, it elevates those ranges between $236,000-$246,000. It also increases the contribution limits for individual 401(k) accounts to $23,500. This means that if you use a solution like a Thrivent IRA account or contribute to your 401(k), you may get to enjoy higher accessibility to save up for your golden years.
Expansion of IRS Direct File Program
In addition to these changes, the IRS has also announced that it has expanded the Direct File program to 25 states. This ensures that you can access the program from half of the United States and benefit from easier tax filing processes. But even if your state isn’t one of the locations where the Direct File program is available, you can always reach out to professionals to get some support.
After learning about these updates, you can become more confident in navigating the maze of tax season. This empowers you to sail through this otherwise challenging aspect of managing your finances.
