While there are still seven tax rates, the brackets for each rate shifted slightly for inflation:

• After an inflation adjustment, the standard deduction increased to $15,750 for single filers as well as married couples filing separately, and to $23,625 for single heads of household. For married couples filing jointly, the standard deduction increased to $31,500. Taxpayers who are at least 65 years old can claim an additional $1,600 ($2,000 if using the single or head of household filing status).
• For most filers, taking the higher standard deduction is more practical and saves the hassle of keeping track of receipts. However, depending on the amount of tax-deductible expenses, you may benefit from itemizing. The “Big Beautiful Bill” introduced significant changes worth highlighting:
  • The deduction for state and local income taxes, property taxes, and real estate taxes (SALT) increased to a cap of $40,000.
  • A new deduction for qualified tips allows eligible taxpayers to deduct up to $25,000 in cash tips if their Modified Adjusted Gross Income (MAGI) is below $150,000 (single) or $300,000 (married filing jointly).
  • A deduction for qualified overtime compensation is available, allowing up to $12,500 for single filers and $25,000 for joint filers.
  • Taxpayers aged 65 and older can benefit from a temporary bonus deduction of up to $6,000 per eligible individual.
  • Taxpayers can deduct up to $10,000 in interest paid on loans for new, U.S. assembled vehicles purchased for personal use.
  • The deduction limit for gifts to public charities is 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash. Note that starting in 2026, non-itemizers will be able to take a deduction for cash donations up to $1,000 (single) or $2,000 (married filing jointly). However, this is not applicable for tax year 2025.
• Traditional IRA and Roth contribution limits remained unchanged at $7,000. Those age 50 and older also qualify to make an additional $1,000 catch-up contribution. 
• 2025 contribution limits for 401(k) and similar accounts increased to $23,500. If you are age 50 or older, you qualify to make an additional $7,500 catch-up contribution as well.
• In 2025, the Child Tax Credit increased to $2,200 per child age sixteen or younger.  
• The estate and gift tax exemption, which is indexed to inflation, increased to $13.99 million in 2024. The annual gift exclusion, which allows you to give money to your loved ones without incurring any tax liability or using up any of the lifetime estate and gift tax exemption, increased to $19,000 in 2024. 
• The Alternative Minimum Tax (AMT) exemptions for 2025 are $88,100 for single filers and $137,000 for married taxpayers filing jointly. The phase-out thresholds are $1,252,700 for married taxpayers filing a joint return and $626,350 for all other taxpayers. 
• The tax year 2025 maximum Earned Income Tax Credit amount is $8,046 for qualifying taxpayers who have three or more qualifying children. 
• For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $325.
• For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,300. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $660. 
• For tax year 2025, the Health Savings Account contribution limits are $4,300 for self-only coverage and $8,550 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.
• For tax year 2025, the foreign earned income exclusion is $130,000.
• If you haven’t contributed to your retirement accounts already, now is the time. Review your earnings for the year and take advantage of any deductions that can lower your tax bill. For example, if you are self-employed, you have the potential to contribute up to $70,000 to a solo 401(k) or SEP IRA. 
• The IRS continues to increase compliance activities such as examinations, collections, and audits.  If you find yourself facing an IRS audit, examination, or have back tax obligations do not hesitate to contact our office. We can evaluate your options and help you make an informed decision to better handle the issue.