In August, the U.S. Bureau of Labor Statistics reported that the consumer price index (CPI) increased by 0.2%, pushing out deduction limitations and resulting in upward adjustments to tax brackets for 2025. According to Bloomberg Tax & Accounting, inflation-adjusted amounts in the tax code will increase by 2.8% from 2024 numbers, about half the increase seen in 2024 and a significant drop from 2023. Tax brackets, capital gains rates, personal exemption amounts, and standard deduction amounts are projected to change for the 2025 tax year, with adjustments based on inflation.
In terms of tax brackets for 2025, certain tax rates and thresholds are expected to see changes, impacting how much individuals will owe in taxes based on their income levels. Capital gains rates will remain the same, but the brackets for the rates will change. Personal exemptions and standard deductions also are projected to see adjustments in the new tax year, with specific amounts outlined for different filing statuses and situations.
The Alternative Minimum Tax (AMT) exemption rate, Kiddie Tax, Child Tax Credit, fringe benefits for transportation, student loan interest, Health Savings Accounts (HSAs), Medical Savings Accounts (MSA), IRAs, charitable distributions, and Roth IRAs are among revenue sources likely to experience changes for 2025. These changes will impact how much individuals can deduct for various expenses, contributions, and income sources, affecting their overall tax liability.
The report also outlines predictions for the Foreign-Earned Income Exclusion, Federal Estate Tax Exclusion, Gift Tax Exclusion, Section 199A Deduction, and various other tax-related figures for the upcoming tax year. These projections offer insight into what taxpayers can expect in terms of deductions, exclusions, and contributions for different income levels and scenarios.
It is important to note that these figures are projections and not the official tax numbers for 2025. The official tax brackets and other tax numbers for the upcoming year will be published by the IRS later in the year, likely in October. The report provides tax professionals and taxpayers with crucial forecasts to prepare for the forthcoming year ahead of the IRS’s official declaration, helping them navigate the impact of inflation on the tax code and plan for their tax obligations accordingly.
Heather Rothman, Vice President of Analysis & Content at Bloomberg Tax & Accounting, highlighted the importance of the annual report in equipping tax professionals and taxpayers with essential information to tackle day-to-day workflow issues by providing precise intelligence where users need it. The full report is available for reference to help individuals understand how the projected changes for 2025 may impact their tax situation and plan accordingly.
