For tax year 2025 (taxes filed in 2026), several significant updates will take effect. Some of these adjustments are routine changes to account for inflation, while others are due to new legislation, specifically the One Big Beautiful Bill (OBBB). This blog will highlight key takeaways and changes that will impact both tax preparers and their clients.
Key takeaways for 2025 tax law changes
Here’s a quick overview of the most important tax law changes for 2025 that professionals need to be aware of:
- Tax brackets increased due to inflation for all filing statuses.
- Standard deductions amounts increased.
- New tax deductions for seniors, qualified tips, overtime wages, and auto loan interest.
- SALT deduction temporarily increased to $40,000 through 2029.
- Child Tax Credit increased to $2,200 per child.
- Adoption Credit is now partially refundable up to $5,000.
- Estate and lifetime gift tax exclusions permanently increased.
2025 tax bracket changes preparers should know
The IRS has implemented routine inflation adjustments, resulting in expanded tax brackets for the 2025-2026 tax year across all filing statuses. Tax preparers should reference these updated tables for filing 2025 returns.
Updated brackets and rates for tax returns due April 15, 2026
Each client’s tax rates will depend on their income and tax filing status. The updated rates and brackets for tax year 2025 (taxes filed in 2026) are as follows:
| Tax rate | Single | Married filing jointly | Head of household | Married filing separately |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 | $0 to $11,925 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 | $250,526 to $375,800 |
| 37% | $626,351 or more | $751,601 or more | $626,351 or more | $375,801 or more |
2025 standard deduction changes tax preparers need to know
The IRS has adjusted the standard deduction amounts for tax year 2025 for inflation. These increases apply across all filing statuses and will affect the majority of taxpayers. Below are the standard deduction amounts for tax year 2025 (taxes filed in 2026) and how they compare to 2024:
| Tax year 2024 | Tax year 2025 | |
| Single and married filing separately | $15,000 | $15,750 |
| Married filing jointly | $30,000 | $31,500 |
| Head of household | $22,500 | $23,625 |
New and updated tax deductions
The One Big Beautiful Bill (OBBB) is a major piece of legislation that introduces several significant tax law changes effective for the tax year 2025. It includes various provisions aimed at benefiting different groups of taxpayers, such as expanded deductions for seniors, qualifications for overtime wages and auto loan interest, and increases in tax credits like the Child Tax Credit. The bill addresses routine adjustments for inflation and also implements new measures that may affect tax preparers and their clients, making it essential for tax professionals to stay informed about these updates. Tax professionals should pay close attention to clients who earn tips or overtime pay, as well as those with auto loans, to ensure they are taking the appropriate tax breaks implemented by the OBBB.
Senior deduction
For individuals aged 65 and older, an additional deduction of $6,000 will be available for tax years 2025 through 2028. This tax break is a significant benefit for seniors and can substantially impact tax filings. For additional information, check out the One Big Beautiful Bill.
Qualified tips deduction
The OBBB introduces a deduction for qualified tips of up to $25,000 for tax years 2025-2028. This is available to both clients who itemize and those who take the standard deduction.
Overtime deduction
The OBBB also introduces an above-the-line deduction for qualified overtime income, up to $12,500 for single filers and $25,000 for joint filers. W-2 clients who regularly exceed their base hours may qualify for this deduction during tax years 2025-2028.
Auto loan interest deduction
Lastly, the OBBB introduces a new deduction enabling clients to deduct up to $10,000 in qualified auto loan interest annually for tax years 2025 through 2028.
SALT deduction cap
The OBBB temporarily raised the SALT cap to $40,000 for eligible taxpayers through 2029. After this date, the cap will revert to $10,000, as specified in the Tax Cuts and Jobs Act (TCJA).
Bonus depreciation
The OBBB reinstated bonus depreciation to 100% for tax year 2025 as originally laid out by the TCJA. For further details, please refer to the Tax Cuts and Jobs Act.
Tax credit updates explained for preparers
Several significant tax credits will experience changes in 2025, impacting eligibility and refund amounts. Preparers should be aware of these updates as they can significantly affect how their clients plan throughout the year. Here are more details about the specific credits that are impacted.
Child Tax Credit
The maximum credit for 2025 is $2,200 per child, an increase from $2,000 in 2024. As with previous years, this credit is subject to income phase-outs.
Earned Income Tax Credit (EITC)
For 2025, the maximum EITC amounts benefiting low- to moderate-income families, and the phase-out thresholds, are set to change. Here is how the new 2025 credit amounts compare to 2024.
| Children or relatives claimed | 2024 max credit amount | 2025 max credit amount |
| Zero | $632 | $649 |
| One | $4,213 | $4,328 |
| Two | $6,960 | $7,152 |
| Three | $7,830 | $8,046 |
Other adjusted tax credits
The maximum credit for adoptions is $17,280 per adopted child for tax year 2025.
Stricter sourcing rules are now in place for the Electric Vehicle (EV) Credit. Purchasers of new EVs by September 30, 2025, may still qualify for credits of up to $7,500. For more details, see the Electric Vehicle (EV) Credit.
Contribution and exclusion limits for 2025
Here are some update contribution limits and exclusions for tax year 2025
- Lifetime gift and estate tax exclusion: $13.99 million
- Annual gift tax exclusion: $19,000
- 401(k) elective deferral limit: $23,500
- Health savings accounts (HSA) contribution limits: $4,300 Individual, $8,550 Family
- Health care flexible spending accounts (FSA): $3,300
Roth IRA MAGI phase-out range:
| 2025 | |
| Single/HoH | $150,000–$165,000 |
| MFJ | $236,000–$246,000 |
| MFS who makes contributions to a Roth IRA | $0–$10,000 |
Traditional IRAs MAGI phase-out range:
| 2025 | |
| Single/HoH | $79,000–$89,000 |
| MFJ | $126,000–$146,000 |
| Individual not covered by a workplace retirement plan but is married to someone who is covered | $236,000–$246,000 |
| MFS who is covered by a workplace retirement plan | $0–$10,000* |
As tax preparers get ready for the 2025 tax season, understanding these changes will be crucial for effective client service and compliance. By staying informed about updates, tax professionals can help clients optimize their tax situations in light of the new laws and regulations.
