2025 New Year Tax Implications

The tax rates for long-term capital gains didn’t change, but the taxable income thresholds for each bracket increased.1

Standard Deduction Increases

The standard deduction will rise in 2025:3

• For single filers and married couples filing separately, the standard deduction increased to $15,000 (up from $14,600 in 2024).
• For married couples filing jointly, the standard deduction rose to $30,000 (up from $29,200 in 2024).
• For heads of household, the standard deduction increased to $22,500 (up from $21,900 in 2024).

Alternative Minimum Tax (AMT) Exemption

The AMT ensures high-income taxpayers pay a minimum level of tax, even with significant deductions. The IRS exempts income up to a certain amount to prevent low- and middle-income taxpayers from being impacted by the AMT. For 2025, the AMT exemption amounts will increase to:3

• $88,100 for single filers
• $68,650 for married couples filing separately
• $137,000 for married couples filing jointly

Retirement Plan Contribution Limits

The IRS increases contribution limits for tax-advantaged retirement accounts each year. For 2025, those contribution limits are:4

• 401(k), 403(b), and 457 plans. Contribution limits rose to $23,500 (up from $23,000 in 2024). Catch-up contributions for those 50 and older remain at $7,500.
• IRAs. Limits remain at $7,000, and the catch-up contribution remains at $1,000.

Health Savings Account (HSA) Contribution Limits

HSAs provide a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses. For 2025, contribution limits are:

• Self-only coverage: $4,300 (up from $4,150 in 2024)
• Family coverage: $8,550 (up from $8,300 in 2024)

Gift and Estate Tax Exemptions

The annual gift tax exemption increases to $19,000 per recipient (up from $18,000 in 2024).3

The lifetime estate tax exemption also increased for 2025. Estates of decedents who die during 2025 can exclude up to $13,990,000 from federal estate taxes (up from $13,610,000 for 2024. These increased limits allow you to transfer more wealth tax-free.

The Looming Expiration of Tax Cuts and Jobs Act (TCJA) Provisions

Looking ahead to the end of the year, many provisions of the TCJA are set to expire at the end of 2025.5 This could mean a return to:

• Pre-2018 tax brackets (adjusted for inflation)
• Lower standard deductions
• The return of personal and dependent exemptions
• Lower child tax credits
• Higher limits on deductible home mortgage interest
• The return of deductible interest on home equity debt
• More middle-income taxpayers subject to the AMT
• Lower estate tax exemptions
• The end of the Qualified Business Income (QBI) deduction for owners of pass-through businesses. (This includes income for self-employed people who are considered sole proprietors.)

President-elect Trump has expressed interest in making these provisions permanent. If Congress acts, these changes could be delayed or avoided entirely. However, it’s too early to tell what will happen and when such legislation will go into effect.

For now, it’s a good idea to assess how the 2025 inflation adjustments will affect your tax situation and work with a financial advisor to identify opportunities to balance tax strategy with long-term wealth-building.