IRS Announces Changes For Tax Year 2025: What You Need To Know

Does the government change tax law just to keep things interesting? Or because it’s fun? Uh—no. We’re pretty sure nobody at the IRS knows what a sense of humor is.

Making annual changes to income tax law is never done for kicks and giggles. Actually, the IRS adjusts the tax brackets every year to account for inflation so that you don’t find yourself paying more taxes than you should—which would suck.

The IRS has announced the 2025 tax changes (adjustments for the taxes you’ll file in 2026), and there’s good news: They’re relatively minor. However, probably the nastiest type of surprise is tax-related. So if you’re an adult who prefers to devise a plan and follow it (instead of just doing whatever feels good), check out the details below. It’s best to be proactive about this stuff.

Tax Brackets Adjust Upward, Tax Rates Unchanged for 2025

The way the income tax system works in the United States is that the more you earn, the more you pay. How much you pay depends on what tax bracket you fall into.

Tax brackets are ranges of income that are taxed at specific tax rates. Your tax bracket is determined by your taxable income and your filing status. And each year, the IRS adjusts the tax brackets for inflation—which is a good thing since it means a larger portion of your income will be taxed at a lower rate than the year before.

For 2025, the size of the adjustments looks different for each tax bracket. For example, the lowest bracket for single filers, which is 10%, now applies to the first $11,925 of income—which is $325 more than in 2024. And the highest bracket for those who are married filing jointly, which is the 37% bracket, now applies to income greater than $626,350—that’s about a $20,000 bump from last year.

The bottom line? More of your money is getting taxed a lower rate, which is good!

While the IRS made some minor changes to the income range inside each tax bracket, the tax rates themselves haven’t changed. Here’s what those 2025 tax brackets and tax rates look like:

Tax Rate	Single Filer	Married, Filing Jointly	Married, Filing Separately	Head of Household
10%	0–$11,925	0–$23,850	0–$11,925	0–$17,000
12%	$11,925–$48,475	$23,850–$96,950	$11,925–$48,475	$17,000–$64,850
22%	$48,475–$103,350	$96,950–$206,700	$48,475–$103,350	$64,850–$103,350
24%	$103,350–$197,300	$206,700–$394,600	$103,350–$197,300	$103,350–$197,300
32%	$197,300–$250,525	$394,600–$501,050	$197,300–$250,525	$197,300–$250,500
35%	$250,525–$626,350	$501,050–$751,600	$250,525–$626,350	$250,500–$626,350
37%	Over $626,350	Over $751,600	Over $626,350	Over $626,3501

Here’s an example. Let’s say you’re single and your taxable income is $40,000 in 2025. According to the numbers above, that means you’ll be in the 12% tax bracket.  

This means you’ll pay 10% on the first $11,925 of your income, then 12% on the next chunk ($11,925–40,000). When we add it all up, your tax bill (rounded to the next dollar) comes to $4,562.

It may sound like a lot, but don’t worry—you can lower your tax burden through deductions and credits.

Standard Deductions Increased for 2025

Now let’s talk about the standard deduction. Depending on your filing status, it reduces how much of your income is taxed and (bonus!) lowers your tax bill.

Don’t settle for tax software with hidden fees or agendas. Use one that’s on your side—Ramsey SmartTax.

So, what’s your standard deduction look like? Here are the standard deduction amounts available for tax year 2025:

Filing Status	Standard Deduction Amount
Single	$15,000
Married Filing Jointly	$30,000
Married Filing Separately	$15,000
Head of Household	$22,5002

Thanks to the Tax Cuts and Jobs Act (TCJA), the standard deduction is much more generous than it was before the law was passed in 2017. For most taxpayers, it makes sense to take the standard deduction and call it a day (but it might make sense to itemize your deductions if you had a lot of deductible expenses last year).

There’s a catch, too: The law is set to expire at the end of 2025, at which point the standard deduction will likely become a lot smaller (that is, unless Congress decides to extend the law before it expires—stay tuned).³

2025 Retirement Contribution Limits

If you’re saving for retirement, you’re ahead of the game—almost half of our fellow Americans had precisely zilch saved for retirement as of 2024. Yikes.⁴

But there’s good news for savers. For 2025, the IRS increased the contribution limits for employer-sponsored retirement savings plans to $23,500. That means you can invest even more for retirement through retirement plans offered at your job—like the 401(k), 403(b) and Thrift Savings Plan (TSP)! 

If you’re 50 years old or over, you can add another $7,500 as a catch-up contribution (for a grand total of $31,000.)

And here’s something brand new for 2025: If you’re aged 60–63, you have an additional catch-up contribution limit of $11,250, which means you can invest a total of $34,750 in your 401(k).

What if you want to invest outside the workplace? If you’re saving for retirement with an IRA (traditional or Roth), the contribution limits for those stays the same at $7,000 for 2025. If you’re over 50, you can take advantage of an extra $1,000 catch-up contribution.⁵

2025 Estate Tax Exclusions

Now, let’s chat a little about estate taxes. Yep, even in death, the tax man makes sure he gets his fair share from whatever you leave behind—that is, unless its value is less than the “basic exclusion amount.”

Allow us to translate that into English: For 2025, if your estate’s value is less than $13.99 million (up from $13.61 million in 2024), then your estate won’t get taxed before it’s passed on to your heirs.⁶

 

2025 Gift Tax Exclusions

What if you want to give money away while you’re still among the living? For tax year 2025, you can gift up to $19,000 per recipient in cash or property without paying the gift tax (that number was $18,000 in 2024). Don’t miss that: Yes, it’s an annual limit, but the cap doesn’t apply to the giver—it applies to whoever receives the gift.⁷

For example: If you had three kiddos and wanted to max out your annual limit, you could give up to $19,000 to each child without paying taxes on it. Of course, if you give more than $19,000 to someone this year, the IRS has a form for that (big surprise . . . said no one ever).⁸

The same “exclusion amount” from the estate tax applies to gift taxes, which means you can apply any excess gift amounts to your lifetime exemption and avoid paying any gift tax on it.⁹

2025 Earned Income Tax Credit

The Earned Income Tax Credit, or EITC, is designed to help lower-income families—especially those with children. It’s a refundable tax credit, which means if the credit is larger than your tax bill, you’ll get the balance as part of your tax refund.

To claim this credit, you don’t have to have kids, but you do need to meet certain eligibility requirements for things like your income, filing status, residency and age. You’ll also need to fill out a Schedule EIC and send it to the IRS along with your tax return if you do have children.¹⁰

The maximum amount of the EITC for tax year 2025 is $8,046, but exactly how much it is in your case depends on those eligibility criteria we just mentioned—so double check with a tax pro or your online tax software to find out how much of the credit you’re eligible to receive.¹¹

What’s Not Changing?

In the same way that the printer’s always out of ink and your favorite mug is always in the dishwasher, some things never change (that includes the tax code). Let’s look at what’s not changing for tax year 2025.

Child Tax Credit

The child tax credit (CTC) is unchanged for 2025. The short version is that it’s a tax credit of up to $2,000 per qualifying child.¹²

But there are a few details you should know: The CTC is only partially refundable (up to $1,600 per child)—so that’s the most you’ll get back as a refund for each kid. The good news is, there’s no limit to how many children qualify for the credit. So if you have nine kiddos running around (for example), you’ll get a pretty hefty check. Consider it a thank-you for helping to raise the entire next generation of Americans all by yourself.

Also, this credit begins to phase out once your income is greater than $200,000 if you’re filing single and $400,000 if you’re married filing jointly.¹³

Personal Exemptions

When the TCJA became law in 2017, the government doubled the standard deduction with one hand but removed personal exemptions with the other. For a lot of taxpayers, these changes made life simpler while also lowering their tax bill (miracles happen). That’s not the case for everyone, though, and unless the law expires or changes, the personal exemption will stay gone.

Itemized Deductions

Thanks to the TCJA, there is no limitation on itemized deductions for 2025. If it seems to you like a lothinges on what Congress does about this tax law before the end of the year, you’d be correct.

Lifetime Learning Credits

The lifetime learning credit exists to help lower-income earners more easily afford an education after high school. However, this credit hasn’t been adjusted for inflation since 2020. You may want to look into the American Opportunity Tax Credit, which not only kicks in a little more money but also is partially refundable.¹⁴

What to Keep an Eye On

Despite rumors that President Donald Trump wants to make tip income tax-exempt or take away the cap on the deduction for state and local taxes—and even abolish the IRS altogether (among other things)—none of this has happened in the real world yet.

Changing the tax code is a long, complicated ordeal that requires Congress, not just the president, so it’ll be some time before we see how Trump’s campaign promises shake out (especially on taxes).

Until that day comes, not much will change—especially for the 2024 tax year. So go ahead and file your tax return once you have all your tax forms and info ready to go. Waiting until the last minute isn’t going to do much of anything . . . except add more stress to an already stressful process.

Besides, the IRS can get pretty nasty when it comes to dishing out penalties. They’ll charge up to 25% on top of what you owe if you don’t file on time. (Don’t mess with the IRS.)¹⁵

If Congress does nothing about the TCJA, tax rates and policy will revert to pre-TCJA levels. That basically means the standard deduction will be cut in half, and filing your taxes will become more complicated. Given the current political climate, this scenario is unlikely. But it’s a good idea to stay informed and be prepared for any scenario.

2026 Tax Season Dates

Tax Day is always April 15 unless it falls on a weekend or holiday, so set a reminder for Wednesday, April 15, 2026, as the deadline for filing your tax return in 2026.

If you’re not ready to file by then, you can file IRS Form 4868 (also known as an extension), which will give you until October 15, 2026 to get your paperwork together.¹⁶ Be aware: While that gives you more time to file, whatever you owe is still due on Tax Day—and if you don’t pay it, the IRS will charge you penalties and interest (their rates hit hard).

Also, if you’re a gig worker, independent contractor or self-employed, you have to make quarterly estimated payments or the government will hit you with penalties.

But no matter what happens between now and then, a little help goes a long way . . .

Get Ready for Tax Day 2026

There are a couple ways you can stay ready—no matter what’s coming.

One is to find a tax pro, buy them coffee and a pastry (or maybe book a legit appointment), and chat about your options—especially if these tax changes impact you in a major way.

But you could also go a second route. As the year goes on, Congress will need to at least do somethingabout tax laws for 2026 and beyond. Once the tax picture gets clearer, you can use your favorite online tax software (like Ramsey SmartTax) to see how your tax bill will be impacted. Plus, you’ll get a good idea about any adjustments you need to make.

Whatever you decide as you’re making your plans for Tax Day 2026, leave a little extra room for Uncle Sam to pull himself together—he’s got a lot going on at the moment. And remember, when we’re talking about doing your taxes, life’s a lot easier when you’re prepared.