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September 23, 2024

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Explore the projected 2025 tax brackets and IRA contribution limits. Get ahead with our comprehensive guide to upcoming financial changes.

The 2025 tax brackets are projected to bring significant changes to IRA contribution limits and various tax thresholds. As we look ahead to the upcoming fiscal year, it’s crucial for individuals and businesses alike to understand these potential adjustments.

This post provides a comprehensive overview of the projected changes, helping you prepare for the financial landscape of 2025.

2025 tax tips

FAQs

Q1: What are the projected 2025 tax brackets?

A1: While the IRS hasn’t released official numbers, projections indicate that the top 37% income tax bracket threshold for married couples filing jointly may increase to $751,600, and for single filers to $626,350.

Q2: How will IRA contribution limits change in 2025?

A2: IRA contribution limits for 2025 are projected to remain at $7,000 for individuals under 50 and $8,000 for those 50 and older. However, income phaseout ranges for Roth IRA contributions are expected to increase slightly.

Q3: What updates are expected for estate planning in 2025?

A3: The estate planning landscape for 2025 is projected to see increases in key areas. The annual gift tax exclusion may rise to $19,000, and the estate tax applicable exclusion amount could increase to $13,990,000 plus any deceased spousal unused exclusion amount.


EVEN THOUGH THE IRS HASN’T RELEASED THE OFFICIAL NUMBERS YET WE’VE PROJECTED MANY OF THE KEY TAX FIGURES FOR 2025.

Standard Deduction

The standard deduction reduces taxable income, simplifying tax filing. Individuals can claim a deduction based on a set amount or a percentage of their earned income, whichever is greater. Additionally, there are extra deductions for individuals who are blind or aged 65 and older, with different amounts for singles/heads of household and all other filing statuses. These deductions help lower the overall tax liability by reducing the taxable income.

2024

Projected for 2025

Married filing jointly

$29,200

$30,000

Head of household

$21,900

$22,500

Single

$14,600

$15,000

Married filing separately

$14,600

$15,000

Standard deduction for dependent

Greater of $1,300 or $450 + earned income

Greater of $1,350 or $450 + earned income

Additional Standard Deduction For Blind Or Aged (65 Or Older)

Single/Head of household

$1,950

$2,000

All others

$1,550

$1,600


Taxable Income Threshold For Top 37% Income Tax Bracket

These thresholds are significant because they represent the income levels at which individuals or households begin to pay the highest tax rate. Changes in these thresholds over time can reflect economic conditions, such as inflation adjustments or economic growth.

2024

Projected for 2025

Married filing jointly

$731,200

$751,600

Head of household

$609,350

$626,350

Single

$609,350

$626,350

Married filing separately

$365,600

$375,800


Long-Term Capital Gain 20% Threshold

(Based On Taxable Income)

The income thresholds for different filing statuses that determine when the 20% long-term capital gains tax rate applies. Long-term capital gains are profits from the sale of assets held for more than a year, and they are taxed at different rates depending on an individual’s taxable income.

2024

Projected for 2025

Married filing jointly

$583,750

$600,050

Head of household

$551,350

$566,700

Single

$518,900

$533,400

Married filing separately

$291,875

$300,000


Alternative Minimum Tax (AMT)

The AMT is a parallel tax system designed to ensure that high-income individuals pay a minimum amount of tax, regardless of deductions or credits they might claim under the regular tax system. The income thresholds at which these exemptions begin to phase out, meaning taxpayers with incomes above these thresholds will see their exemptions reduced. 

2024

Projected for 2025

Maximum AMT exemption amount

Married filing jointly

$133,300

$137,000

Single/Head of household

$85,700

$88,100

Married filing separately

$66,650

$68,500

Exemption phaseout threshold

Married filing jointly

$1,218,700

$1,252,700

Single/Head of household

$609,350

$626,350

Married filing separately

$609,350

$626,350

26% on AMTI* up to amount, 28% on AMTI above amount

Married filing separately

$116,300

$119,550

All others

$232,600

$239,100

*Alternative minimum taxable income

Kiddie Tax: Child’s Unearned Income

“Kiddie tax”, refers to a tax regulation affecting children’s unearned income, such as interest, dividends, and capital gains. This tax was implemented to prevent families from transferring investments to children to take advantage of their typically lower tax rates. 

2024

Projected for 2025

Above this amount taxed using parents’ tax rates

$2,600

$2,700


IRAs

Understanding these limits and phaseouts is crucial for effective retirement planning, as they impact how much one can contribute or deduct from taxable income, ultimately affecting tax liabilities and retirement savings growth.

2024

Projected for 2025

Contribution limits

Traditional and Roth IRAs (combined)

$7,000

($8,000 if age 50 or older)

$7,000

($8,000 if age 50 or older)

Roth IRA income phaseout range (contributions)

Single/Head of household

$146,000 - $161,000

$150,000 - $165,000

Married filing jointly

$230,000 - $240,000

$236,000 - $246,000

Married filing separately

$0 - $10,000

$0 - $10,000

Traditional IRA income phaseout range (deductibility)

Covered by an employer-sponsored plan and filing as:

Single/Head of household

$77,000 - $87,000

$79,000 - $89,000

Married filing jointly

$123,000 - $143,000

$126,000 - $146,000

Not covered by plan but filing joint return with covered spouse

$230,000 - $240,000

$236,000 - $246,000

Married filing separately and either spouse is covered by plan

$0 - $10,000

$0 - $10,000


Estate Planning

Key information about estate planning, which is essential for managing and distributing a person’s assets during their lifetime and after death. Tax rates and exclusion amounts are crucial for understanding how much wealth can be transferred without incurring taxes. This is important for preserving wealth and maximizing inheritance for beneficiaries. 

2024

Projected for 2025

Top gift, estate, and generation-skipping transfer (GST) tax rate

40%

40%

Annual gift tax exclusion

$18,000

$19,000

Noncitizen spouse annual gift tax exclusion

$185,000

$190,000

Gift tax and estate tax applicable exclusion amount

$13,610,0001 + DSUEA2

$13,990,0001 + DSUEA2

GST tax exemption

$13,610,000

$13,990,000

1Basic exclusion amount

2Deceased spousal unused exclusion amount

Stay Informed And Plan Ahead For 2025

As we approach 2025, understanding the projected changes in tax brackets, IRA contribution limits, and estate planning thresholds is crucial for effective financial planning. While these projections provide valuable insights, it’s important to remember that official figures may vary. By staying ahead of the curve, you can better position yourself for financial success in the coming year.

Contact your tax and financial advisors to determine the best moves for your situation.


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