For the 2025 tax season, taxpayers can expect inflation-adjusted increases to standard deductions and tax brackets, new temporary deductions, and updates to tax credits and retirement account limits. These changes are largely due to the “One, Big, Beautiful Bill Act,” which was signed in July 2025 and made many provisions of the 2017 Tax Cuts and Jobs Act permanent.
New deductions for working families and seniors (2025–2028)
New, temporary tax deductions are available for qualifying taxpayers through 2028:
-Qualified tips: You can deduct up to $25,000 for tips if your modified adjusted gross income (MAGI) is under $150,000 ($300,000 for joint filers).
-Qualified overtime pay: You may deduct up to $12,500 for overtime compensation ($25,000 for joint filers), with the deduction phasing out for MAGI above $150,000 ($300,000 for joint filers).
-Auto loan interest: A deduction of up to $10,000 is available for interest paid on a loan for a qualified passenger vehicle purchased in 2025. This deduction phases out for MAGI over $100,000 ($200,000 for joint filers).
-Enhanced senior deduction: Individuals age 65 and older can claim an additional $6,000 deduction ($12,000 for a qualifying couple). This phases out for single filers with MAGI over $75,000 ($150,000 for joint filers).
Standard deductions and tax brackets
The standard deduction will increase for all filing statuses to account for inflation. The seven federal tax brackets from the 2017 tax law (10%, 12%, 22%, 24%, 32%, 35%, and 37%) have been made permanent.
2025 standard deduction amounts:
-Married filing jointly: $31,500 (up from $30,000 in 2024)
-Head of household: $23,625 (up from $22,500 in 2024)
-Single or married filing separately: $15,750 (up from $15,000 in 2024)
2025 income tax brackets (Single filers):
-10%: $0 to $11,925
-12%: $11,926 to $48,475
-22%: $48,476 to $103,350
-24%: $103,351 to $197,300
-32%: $197,301 to $250,525
-35%: $250,526 to $626,350
-37%: $626,351 or more
Changes to tax credits
-Child Tax Credit: The maximum credit increases to $2,200 per eligible child, with up to $1,700 of that potentially refundable for 2025. Inflation will also adjust this credit annually.
-Adoption Credit: The maximum credit for adopting a child with special needs rises to $17,280.
-Electric Vehicle (EV) Credits: Several clean energy credits, including the EV credit, are set to end or be capped as of September 30, 2025.
Retirement and estate planning updates
-401(k) and 403(b) contributions: The annual employee contribution limit increases to $23,500. The catch-up contribution limit for those 50 and older remains $7,500, but a higher catch-up limit of $11,250 applies to individuals ages 60–63.
-IRA contributions: The IRA contribution limit remains unchanged at $7,000.
-Gift tax exclusion: The annual exclusion for gifts increases to $19,000 per recipient for 2025.
-Estate tax exemption: The basic exclusion amount for estates of decedents who die in 2025 is $13.99 million.