📬 Key Updates for the 2025 Tax Year (Filed in 2026) 📬
Dear Valued Clients, As we prepare for the 2026 filing deadline, it's essential to stay informed about the latest tax updates and changes for the 2025 tax year. Here are the key highlights you need to know:
1. Standard Deduction Increases (Tax Year 2025)
The standard deduction has been significantly adjusted for inflation.
- Married Couples Filing Jointly: The standard deduction rises to $31,500.
- Heads of Households: The standard deduction increases to $23,625.
- Single Taxpayers and Married Individuals Filing Separately: The standard deduction is now $15,750.
2. Marginal Tax Rates (Tax Year 2025)
The seven marginal tax rates remain in effect. The income thresholds for each bracket have increased for 2025.
| Tax Rate |
Single Filers (Over) |
Married Filing Jointly (Over) |
| 37% |
$626,350 |
$751,600 |
| 35% |
$250,525 |
$501,050 |
| 32% |
$197,300 |
$394,600 |
| 24% |
$103,350 |
$206,700 |
| 22% |
$48,475 |
$96,950 |
| 12% |
$11,925 |
$23,850 |
| 10% |
Up to $11,925 |
Up to $23,850 |
3. Key Credit and Limit Adjustments (Tax Year 2025)
- Child Tax Credit (CTC): The maximum credit is increased to $2,200 per qualifying child. The refundable portion (Additional Child Tax Credit) is up to $1,700 per child.
- Earned Income Tax Credit (EITC): The maximum EITC amount for taxpayers with three or more qualifying children is $8,046.
- Saver's Credit: The maximum AGI to qualify for any portion of the credit is $79,000 for Married Filing Jointly, $59,250 for Head of Household, and $39,500 for All Other Filers.
- Alternative Minimum Tax (AMT) Exemption: The exemption amount is $88,100 for single filers and $137,000 for married couples filing jointly.
4. Benefit Plan Contribution Limits (2025)
- Health Flexible Spending Arrangement (FSA): The maximum employee salary reduction contribution is $3,300. For plans that allow a carryover, the maximum unused amount that can be carried over is $660.
- Qualified Transportation Fringe Benefit: The monthly exclusion limit for commuter highway vehicle transportation, transit passes, and qualified parking is $325.
5. Preview of Tax Year 2026 (Filed in 2027)
To help you with future planning, the IRS has already released the inflation-adjusted figures for the 2026 tax year:
- Standard Deduction (2026):
- Married Filing Jointly: $32,200
- Single/Married Filing Separately: $16,100
- Head of Household: $24,150
- Maximum EITC (3+ Children, 2026): $8,231.
- Health FSA Contribution (2026): $3,400.
- Qualified Transportation (2026): $340 per month.
6. Tax Planning Strategies for 2025
- Maximize Retirement Accounts: Maximize contributions to retirement accounts like IRAs and 401(k)s.
- Utilize Health Savings Accounts (HSAs): Contribute to an HSA if you have a high-deductible health plan.
- Claim All Eligible Credits: Ensure you claim all eligible credits, such as the Child Tax Credit and the Saver's Credit.
- Deduct Charitable Contributions: Keep records of all charitable donations.
- Consider Itemizing Deductions: If your total itemized deductions exceed the standard deduction, consider itemizing.
- Review Medical Expenses: Deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income.
- Leverage Home Office Deduction: If you work from home, you may be eligible for a home office deduction (must be Principal Place of Business).
Stay Informed and Prepared
We understand that navigating tax changes can be challenging. Our team is here to help you understand these updates and how they may affect your tax situation. If you have any questions or need assistance with your tax preparation, please don't hesitate to reach out.
Thank you for trusting us with your tax needs. We look forward to serving you!
Best Regards,
THE ACH MANAGEMENT TEAM
