Upcoming tax law changes for 2025

By Thomson Reuters Tax & Accounting 

What’s changing?

Rise in standard deductions

For married couples filing jointly, the standard deduction increases to $30,000, up $800 from tax year 2024. For heads of households, it is $22,500 for tax year 2025, up $600 from tax year 2024. For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction increases to $15,000 for 2025, up $400 from 2024.

Alternative minimum tax (AMT) exemption

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, the IRS announced. For married couples filing jointly, the exemption amount rises to $137,000 and begins to phase out at $1,252,700.

Earned income tax credit

For qualifying taxpayers who have three or more qualifying children, the maximum Earned Income Tax Credit amount is $8,046 for tax year 2025. This is up from $7,830 for tax year 2024.

Estate tax credits

The federal estate-tax exclusion amount increases to $13.99 million from $13.61 million in 2024.

401K and Roth

For 2025, the amount individuals can contribute to their 401(k) plans will increase to $23,500, up from $23,000 for 2024. This change applies to those who participate in 401(k) plans, as well as 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan.

The IRS also revealed that, starting in 2025, the 401(k) catch-up contribution limit will remain at $7,500 for participants aged 50 and older. However, under a change made in SECURE 2.0, a higher catch-up contribution limit applies to investors aged 60 to 63. This higher catch-up contribution limit is $11,250 instead of $7,500.

In addition, the IRS announced higher income thresholds for Roth IRA contributions.

For Roth IRA contributions in 2025, the income phase-out range for taxpayers increases to between $150,000 and $165,000 for singles and heads of household, up from between $146,000 and $161,000. For married couples filing jointly, the income phase-out range rises to between $236,000 and $246,000, up from between $230,000 and $240,000.

The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA remains between $0 and $10,000 (it is not subject to an annual cost-of-living adjustment).

What’s not changing?

Personal Exemptions

The personal exemptions remain at $0 for tax year 2025. The elimination of the personal exemption was part of the TCJA.

Child tax credit

The maximum child tax credit is $2,000 per qualifying child, with a refundable amount of $1,700.

CLICK HERE for full article

 _________________________________________