Each year, the IRS adjusts various tax code parameters for inflation. This prevents “bracket creep,” where taxpayers are moved into higher income brackets or experience decreased value from credits and deductions due to inflation rather than actual income increases.

For tax year 2025, several key adjustments and provisions are notable. Here’s a brief overview of the changes and other relevant information that will impact how your taxable income is calculated for this year.

The tax year 2025 adjustments outlined below generally apply to income tax returns filed in the tax season of 2026.

• Standard Deductions have increased for all filing statuses, with notable rises for Single, Married Filing Jointly, and Head of Household categories.
• Marginal Tax Rates have varied income thresholds for each bracket, though rates themselves have remained consistent, with the top rate at 37%.
• Alternative Minimum Tax Exemptions have increased, with higher income phase-out thresholds.
• Earned Income Tax Credit (EITC) offer higher maximum credit values, particularly for those with three or more children.
• Qualified Transportation Fringe Benefits and Health Flexible Spending Accounts see increased contribution limits.
• Medical Savings Accounts have updated limits for deductibles and out-of-pocket expenses for both self-only and family coverage.
• Foreign Earned Income Exclusion and Estate and Gift Tax exclusions have been increased.
• Adoption Credit has seen an increase in the maximum allowable credit for adopting a child with special needs.

Some items remain unchanged, such as personal exemptions, limitations on itemized deductions, and thresholds for phasing out the Lifetime Learning Credit.

These inflation-related adjustments and provisions will guide taxpayers’ reporting and planning strategies for the upcoming tax year.