The IRS has announced several significant inflation-adjusted changes for 2025 that will impact tax planning for individuals and families.
First, the basic estate tax exclusion will increase to $13.99 million for individuals who pass away in 2025, up from $13.61 million in 2024. Additionally, the annual gift exclusion will rise to $19,000, an increase from $18,000 in the previous year. These adjustments allow for greater tax-free transfers both during an individual’s lifetime and at death.
Regarding standard deductions, the amounts will also see increases. For single taxpayers and those married filing separately, the deduction will rise by $400 to $15,000. For married couples filing jointly, the deduction will increase by $800, bringing the total to $30,000. Heads of household will receive a $600 increase, resulting in a total deduction of $22,500. There will be no limits on itemized deductions, and the personal exemption will remain at zero, consistent with the Tax Cuts and Jobs Act of 2017.
The IRS has made adjustments to income tax brackets, although the top rate will remain at 37% for individuals earning over $626,350 and $751,600 for married couples. The new tax brackets for 2025 are as follows:
- 35% for incomes above $250,525 ($501,050 for married couples)
- 32% for incomes over $197,300 ($394,600 for married couples)
- 24% for incomes above $103,350 ($206,700 for married couples)
- 22% for incomes exceeding $48,475 ($96,950 for married couples)
- 12% for incomes over $11,925 ($23,850 for married couples)
- 10% for incomes of $11,925 or less ($23,850 for married couples)
The alternative minimum tax (AMT) exemptions will also be increased, set at $88,100 for singles and $137,000 for married couples filing jointly.
For individuals earning income overseas, the foreign earned income exclusion will rise to $130,000, up from $126,500. Additionally, the maximum earned income tax credit for families with three or more qualifying children will increase to $8,046, from $7,830 in 2024.
Health flexible spending accounts (FSAs) will see their salary reduction limit for contributions increase to $3,300, and for those with a cafeteria plan that allows carryover, the maximum carryover amount will rise to $660.
Changes are also coming for medical savings accounts (MSAs). For 2025, self-only coverage must have a deductible between $2,850 and $4,300, with a maximum out-of-pocket expense of $5,700. For family coverage, the deductible will range from $5,700 to $8,550, with a $10,500 out-of-pocket limit.
In total, the IRS has adjusted over 60 tax provisions that will affect how individuals file their taxes in 2026.
For guidance through these changes, LEO Wealth offers expert tax planning and preparation services tailored to individual needs. Contact us to effectively navigate the new regulations and maximize your tax benefits.
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