2025 Tax Brackets, Social Security Benefits Increase, and Other Inflation Adjustments
The IRS and Social Security Administration recently announced changes for 2025. Here are some highlights:
- The SSA has announced that benefit checks will rise 2.5% in 2025. Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. The fastest way to find out your new benefit amount is to access your personal mySocial Security account to view the COLA notice online.
- The maximum amount of earnings subject to Social Security tax (taxable maximum) will increase to $176,100 from $168,600.
- The individual tax brackets for ordinary income have been adjusted by inflation. On average, tax parameters that are adjusted for inflation will increase about 2.80%.
- The standard deduction (used instead of itemized deductions) will increase by $400 for single filers and $800 for joint filers. Seniors over age 65 may claim an additional standard deduction of 2,000 for single filers and $1,600 for joint filers.
- The personal exemption for 2025 remains at $0 (eliminating the personal exemption was part of the Tax Cuts and Jobs Act of 2017 (TCJA))
- Long-term capital gains rates and brackets:
- The maximum child tax credit is still $2,000 per qualifying child and was not adjusted for inflation. The refundable portion of the child tax credit is adjusted for inflation and will remain $1,700 for 2025.
- The retirement plan contribution limit for employees who participate in a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,500 (an increase of $500 from 2024) $31,000 for those aged 50 and over (which includes an unchanged $7,500 catch up contribution limit)
- The limit on annual contributions to an IRA remains at $7,000 and the IRA catch-up limit remains at $1,000.
- The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $150,000 and $165,000 for singles and heads of households. For married couples filing jointly, the income phase-out range is between $236,000-$246,000.
- Eligible IRA owners age 70 ½ and older can make up to $105k in tax-free charitable donations during 2024 through qualified charitable donations (QCDs). Qualified charitable distributions are made directly to the eligible charity from a traditional IRA, inherited IRA, inactive Simplified Employee Pension (SEP) plan and inactive Savings Incentive Match Plan for Employees (SIMPLE) IRAs. 2025 amounts should become available later this year.
- The annual maximum Health Savings Account (HSA) contribution limits for 2025 will be $4,300 for self-only coverage and $8,550 for family coverage. The catch-up contribution for savers age 55 and older remains unchanged at $1,000. A high deductible health plan (HDHP) must have a deductible of at least $1,650 for singles and $3,300 for family.
- In 2025, eligible employees may contribute up to $3,300 to a FSA (Flexible Spending Account).
- Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000.
- The annual exclusion for gifts increases to $19,000 for the calendar year 2025, up from $18,000 from 2024.
- The standard mileage rates for 2024 is $0.67 per mile. 2025 rates should become available later this year.
More Information
- If you would like to read more about the 2025 changes from the IRS here is the IRS Publication and summary at the Tax Foundation website.
- For help estimating your taxes or withholding:
