Accountant explains 2025 tax inflation adjustments

By Leah Rainwater

Taxpayers may be able to keep more money in their pockets during the 2025 tax year.

The Internal Revenue Service came out with 2025 inflation adjustments for taxes on Oct. 22.

Some key things to know about the adjustments are the increase in standard deductions for those filing single or married individuals filing separately.

Minimum exemption amounts also increase at different rates for minimum tax exemption amounts.

Taxpayers with three or more qualifying children in the 2025 tax year will receive a maximum Earned Income Tax Credit amount of $8,046, an increase from $7,830 for tax year 2024.

Among other things, the dollar limitation for flexible spending accounts for employees and the maximum amount of rollover will increase.

Medical savings accounts will also see increases in the maximum deductibles available to report on taxes.

“What that means is they are adjusting different income thresholds, tax brackets, deductions credits,” said Cristina Wiebelt-Smith, a certified public accountant at Gertsema Wealth Advisors. “Since we have inflation every year, what they’re doing is they’re just increasing numbers to try and help people save a little more on their taxes and be able to keep a little more in their pocket.”

Wiebelt-Smith said an adjustment notice before the next tax year is pretty common.

However, one notable provision that is going to affect taxpayers for the 2025 tax year is the expansion of the tax brackets.

“So they expanded the tax brackets, which just means that more of your income is going to get taxed at a lower rate,” Wiebelt-Smith said. “Then the other thing they changed are the standard deductions. So most people take a standard deduction as what reduces your taxable income.”

The IRS increased the standard deductions anywhere from $400 to $800, depending on a taxpayer’s filing status.

When it comes to who these adjustments will affect in the 2025 tax year, Wiebelt-Smith said it depends.

“These adjustments will affect most people, just because when you adjust a standard deduction or tax bracket, that’s going to affect most people.”

And depending on other specified situations, like the age of the filer, if they have children and what assets they own, seeing a tax break during the 2025 tax year will be something to look forward to.

Taxes filed in April of 2026 will be the first to see some of the changes.