In 2025, the Internal Revenue Service (IRS) introduced several inflation-adjusted changes to various tax provisions, aiming to align them with current economic conditions.

• Standard Mileage Rate for Business Use: The rate has increased to 70 cents per mile, up from 67 cents in 2024, reflecting higher vehicle operation costs.
• Standard Deductions:
  • Single Filers and Married Individuals Filing Separately: Increased to $15,000, a $400 rise from 2024.
  • Married Couples Filing Jointly: Increased to $30,000, up by $800.
  • Heads of Household: Increased to $22,500, a $600 increase.
• Marginal Tax Rates: The top tax rate of 37% now applies to single taxpayers with incomes over $626,350 and married couples filing jointly over $751,600. Other rates are adjusted as follows:
  • 35% for incomes over $250,525 ($501,050 for joint filers)
  • 32% for incomes over $197,300 ($394,600 for joint filers)
  • 24% for incomes over $103,350 ($206,700 for joint filers)
  • 22% for incomes over $48,475 ($96,950 for joint filers)
  • 12% for incomes over $11,925 ($23,850 for joint filers)
  • 10% for incomes up to $11,925 ($23,850 for joint filers)
• Alternative Minimum Tax (AMT) Exemption:
  • Unmarried Individuals: Exemption increases to $88,100, phasing out at $626,350.
  • Married Couples Filing Jointly: Exemption rises to $137,000, phasing out at $1,252,700.
• Earned Income Tax Credit (EITC): For taxpayers with three or more qualifying children, the maximum EITC amount increases to $8,046, up from $7,830 in 2024.
• Qualified Transportation Fringe Benefit: The monthly limitation for qualified transportation and qualified parking rises to $325, an increase from $315 in 2024.
• Health Flexible Spending Arrangements (FSAs): The contribution limit for employee salary reductions increases to $3,300, up from $3,200. The maximum carryover amount for unused balances rises to $660, from $640.
• Medical Savings Accounts (MSAs):
  • Self-Only Coverage: Annual deductible must be between $2,850 and $4,300, with a maximum out-of-pocket expense of $5,700.
  • Family Coverage: Annual deductible ranges from $5,700 to $8,550, with a maximum out-of-pocket expense of $10,500.
• Foreign Earned Income Exclusion: The exclusion amount increases to $130,000, up from $126,500 in 2024.
• Estate and Gift Tax Exclusions:
  • Estate Tax Exclusion: Rises to $13,990,000 from $13,610,000.
  • Annual Gift Tax Exclusion: Increases to $19,000 per recipient, up from $18,000.
• Adoption Credit: The maximum credit for adopting a child with special needs increases to $17,280, up from $16,810.

These adjustments are designed to prevent taxpayers from experiencing “bracket creep,” where inflation pushes income into higher tax brackets, resulting in increased tax liability without a real increase in purchasing power.