By Brandon Miller–
Ever wondered how our federal tax code came to be? Well, in 1909, progressives in Congress added an income tax provision to a tariff bill. Conservatives tried to block it, thinking that 75% of states wouldn’t ratify the amendment. To their surprise, the 16th Amendment passed in 1913, granting Congress the authority to impose a federal income tax. Back then, less than 1% of the population paid income taxes, and the rate was just 1% of net income!
Fast forward to late last year, when the IRS shared details about more than 60 tax provisions that will impact taxpayers when they file in 2026 for the 2025 tax year.
These annual inflation adjustments don’t cover everything, but here are a few key highlights to keep in mind as we prepare for 2025:
Tax Brackets – These are shifting, so your taxable income (after deductions) will be taxed at new rates. Keep in mind, this doesn’t include tax credits or self-employment tax.
Standard Deduction – For single filers and married individuals filing separately, the deduction will rise to $15,000 in 2025 ($400 more than 2024). For married couples filing jointly, it’s going up to $30,000. Heads of households can expect a $600 increase, bringing it to $22,500. If you’re 65 or older, there’s an extra bump in the standard deduction too!
Alternative Minimum Tax (AMT) Exemption – The exemption amount for unmarried individuals will be $88,100, and it begins to phase out at $626,350. For married couples filing jointly, it’s $137,000, phasing out at $1,252,700.
Child Tax Credit – This remains at $2,000 per qualifying child, though the refundable portion will stay at $1,700.
Gift & Estate Exemption – This rises to $14 million for individuals (up from $13.6M in 2024) with an annual gift tax exclusion of $19,000.
Long-Term Capital Gains – Still a favorite for investors, these gains (like the profit from stocks held over a year) are taxed at more favorable rates than short-term gains.
Pass-Through Business Deduction – The 20% deduction for pass-through businesses will start phasing in for those with income over $197,300 (or $394,600 for joint filers) in 2025.
IRA Contributions – For 2024 and 2025, the contribution limit is $7,000 for those under age 50, and $8,000 for those 50 and over. The SEP-IRA limit is 25% of an employee’s compensation, up to $70,000.
Heads-up for 2026: Unless extended, many provisions of the Tax Cuts and Jobs Act (TCJA) will expire by the end of 2025. While Republicans are generally in favor of extending these provisions, negotiations will shape what stays and what changes.
There’s a lot to consider, but remember, you’ve got a year to prepare for these changes.
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals. For more information: https://www.briofg.com/
Money Matters
Published on February 27, 2025
Recent Comments