Capitalize on today’s evolving market dynamics.
With markets in flux, now is a good time to meet with a wealth advisor.
On this page
Key takeaways
The July 2025 tax changes included in the “One Big Beautiful Bill Act” extended many provisions of the 2017 Tax Cuts and Jobs Act (TCJA).
TCJA extensions include an increased standard deduction, lower tax brackets and a higher lifetime estate tax exemption amount.
Retirement plan contribution limits were not impacted by the new tax laws.
Each year, the IRS makes inflation-related adjustments to more than 60 tax provisions to keep income tax brackets, deductions and other inputs in line with changes occurring related to the cost of living. On average, adjustments for the tax year 2025, including federal income tax brackets (filing returns in 2026), increased by about 2.8%.
The July 2025 passage of a comprehensive legislative package known as the “One Big Beautiful Bill Act” established many new tax laws that became effective immediately. Most importantly, the legislative package makes permanent aspects of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of 2025.
These adjustments may affect your tax planning strategies going forward. Unless noted, changes in the new tax law go into effect for the 2025 tax year.
2025 tax law changes to tax brackets, deductions, and credits in brief
Here’s a summary of key changes in the new tax bill.
- The seven federal tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent.
- Standard deductions increased, plus a new “bonus” deduction for older adults.
- Alternative minimum tax exemption thresholds reduced for phaseout.
- Child tax credit increased to $2,200 per qualifying child.
- SALT deduction cap increased temporarily, with income-based phaseouts.
2025 tax brackets
For the 2025 tax year, the seven federal tax rates put in place in the TCJA are now permanent: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
A key income threshold to watch for high-income filers is $197,300 for single filers and $394,600 for married couples filing jointly. Those are the respective thresholds for moving up from the 24% tax rate bracket to the higher 32% rate bracket. The top marginal income rate of 37% will apply to single filers with taxable income of $626,350 and, for married couples filing jointly, taxable income above $751,600.
2025 Tax Rate
Single Filers
Married Filing Joint Return
Head of Household
10%
$0 to $11,925
$0 to $23,850
$0 to $17,000
12%
$11,925 to $48,475
$23,850 to $96,950
$17,00 to $64,850
22%
$48,475 to $103,350
$96,950 to $206,700
$64,850 to $103,350
24%
$103,350 to $197,300
$206,700 to $394,600
$103,350 to $197,300
32%
$197,300 to $250,525
$394,600 to $501,050
$197,300 to $250,500
35%
$250,525 to $626,350
$501,050 to $751,600
$250,500 to $626,350
37%
$626,350 or more
$751,600 or more
$626,350 or more
Source: Internal Revenue Service.
Filing Status
2025 Deduction Amount
2026 Deduction Amount
Single
$15,750
$16,100
Married Filing Jointly
$31,500
$32,200
Head of Household
$23,625
$24,150
In addition, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,350 or the sum of $450 and the individual’s earned income.
A new “bonus” deduction for older adults was added as part of the new tax package, beginning with the 2025 tax year and remaining in effect through 2028.
For 2025, the total standard plus bonus deduction for those age 65 and older is $21,750 for a single person and $43,500 for a married couple filing a joint return. However, income thresholds apply. Only single filers with modified adjusted gross income (MAGI) of $75,000 or below, or married couples with MAGI of $150,000 or below, can claim the full deduction. It gradually phases out for those with incomes above those thresholds.
Filing Status
Modified Adjusted Gross Income (MAGI) Phaseout Threshold
2025 Bonus Deduction for 65+ Aged Individuals
Single
<$75,000
$6,000
$75,000-$175,000
Reduced by 6% for every dollar over threshold
>$175,000
$0
Married Filing Jointly (both must be 65+)
<$150,000
$12,000
$150,000-$250,000
Reduced by 6% for every dollar over threshold
>$250,000
$0
2025 capital gains tax brackets
Long-term capital gains face different brackets and rates than ordinary income, and those brackets also adjusted slightly higher for 2025.
It is possible for people with lower income to pay no long-term capital gains tax when selling appreciated assets that they have held for more than a year (long-term capital gain). For example, the 0% long-term capital gains tax applies to married couples filing a joint return with incomes of $96,700 or below.
Applicable Long-Term Capital Gains Tax Rate
Single Filers with Taxable Income Over
Married Couples Filing Jointly with Taxable Income Over
Heads of Households with Taxable Income Over
0%
$0
$0
$0
15%
$48,350
$96,700
$64,750
20%
$533,400
$600,050
$566,700
Net Investment Income Tax (NIIT) 2025
The Net Investment Income Tax applies to certain investment income for individuals, estates, and trusts with income above a set threshold.
Net investment income generally includes interest, dividends, capital gains, and other categories defined by the Internal Revenue Service (IRS).
NIIT is calculated at 3.8% of the lesser of your net investment income or the amount your modified adjusted gross income (MAGI) exceeds the threshold. If your MAGI is below the threshold—even if you have investment income—you won’t owe NIIT. The thresholds don’t adjust for inflation.
Filing Status
Net Investment Income Tax (NIIT) Threshold
Single
$200,000
Married Filing Jointly
$250,000
Alternative minimum tax 2025
The alternative minimum tax (AMT) was created in 1969 to close tax loopholes for those in higher tax brackets. The new tax law adjusted the alternative minimum tax in a few ways, including a reduction in income levels for exemption phaseout. These amounts will be adjusted for inflation in subsequent years.
Adjustments for the 2025 tax year include:
- The AMT exemption increased to $88,100 for individuals and $137,300 for married couples filing jointly.
- The AMT exemptions phase out at 25 cents per dollar earned once AMT income (AMTI) reaches $500,000 for single filers and $1,000,000 for married couples filing jointly.
Child tax credit 2025
Under the new tax legislation, the maximum child tax credit for 2025 is raised to $2,200 per qualifying child and will be adjusted yearly for inflation. Qualified taxpayers may receive a refund of up to $1,700 in 2025 as part of the additional child tax credit (this amount will also adjust annually for inflation).
However, eligibility rules and income thresholds apply. To qualify for the tax credit, a child:
- Must be under age 17 at the end of the tax year
- Be listed as a dependent on your tax return
- Live with you for more than half the year
- Meet citizenship requirements, and have at least one parent or guardian also meet citizenship requirements
Additionally, the child tax credit is only available for taxpayers with MAGI up to a certain threshold, after which it’s phased out.
Filing Status
MAGI Phaseout Threshold
Child Tax Credit 2025
Single
<$200,000
$2,200 per child
$200,000-$240,000
Reduced by $50 for each $1,000 of income over threshold
>$240,000
$0
Married Filing Jointly
<$400,000
$2,200 per child
$400,000-$440,000
Reduced by $50 for each $1,000 of income over threshold
>$440,000
$0
2025 gift tax exclusion and lifetime estate tax exemption amounts
The 2025 gift tax exclusion allows the first $19,000 of monetary gifts to any person to be excluded from tax. The exclusion is $190,000 for gifts to spouses who are not citizens of the U.S.
In addition, the lifetime exclusion amount on estates of decedents who die during 2025 is $13.99 million per individual. In 2026, the new legislation increases the lifetime exclusion amount permanently to $15 million per individual and will be adjusted annually to reflect inflation.
New state and local tax (SALT) deduction levels
With the new legislation, the SALT deduction limit will increase from $10,000 to up to $40,000 for married couples filing jointly.
However, the new deduction amount only applies to those with MAGI up to a certain threshold. Above that threshold, the deduction amount phases out and eventually, the cap reverts to $10,000 for married couples filing jointly.
The limit is based on your tax filing status and only applicable if you itemize your deductions.
Filing Status
MAGI Phaseout Threshold
SALT Deduction Limit 2025
Married Filing Jointly
<$500,000
$40,000
$500,000-600,000
Reduced by 30% for every dollar over threshold, but not below $10,000
>$600,000
$10,000
Married Filing Separately
<$250,000
$20,000
$250,000-$300,000
Reduced by 30% for every dollar over threshold, but not below $5,000
>$300,000
$5,000
The new income limit and phase out thresholds increase by 1% every year through tax year 2029. After that, the SALT deduction is permanently reduced to $10,000 ($5,000 for married couples filing separately).
Retirement plan contribution adjustments for 2025
The 2025 legislative package did not impact retirement account contribution limits.
- The limit on annual contributions to a traditional or Roth IRA for 2025 remains $7,000. The traditional and Roth IRA catch up contribution limit for individuals aged 50 and over remains at $1,000 for 2025.
- The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan increases to $23,500.
- Contribution limits for a simplified employee pension (SEP) IRA in 2025 are $70,000 or 25% of the employee's compensation, whichever is lower. This is an increase from the 2024 limit of $69,000. The maximum compensation that can be considered for SEP IRA contributions also increased to $350,000 in 2025.
- Individuals with a SIMPLE IRA can contribute up to $16,500 in 2025, up from $16,000. Individuals aged 50 and older can contribute an additional $3,500 in catch-up contributions. (See exception for employees ages 60-63 below.)
- The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan remains $7,500 for 2025. (Therefore, participants 50 and older generally can contribute up to $31,000 each year, starting in 2025.)
- Due to a provision of the Secure 2.0 Act, a higher catch-up contribution limit applies for employees ages 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250. A higher catch-up contribution limit of $5,250 also applies for individuals ages 60-63 who contribute to a SIMPLE IRA.
- The Modified Adjusted Gross Income (MAGI) ranges for determining eligibility for Roth IRAs also have increased for 2025.
Which tax provisions aren’t changing for 2025?
Certain items that were indexed for inflation in the past are currently not adjusted, despite other 2025 tax changes. Among those tax issues that remain unchanged:
- Personal exemptions. First eliminated in the TCJA, they are now permanently eliminated.
- Itemized deductions. For taxpayers in the top tax bracket (37%), itemized deductions are limited to 35 cents on the dollar. These limits are not applicable to taxpayers in all other tax brackets.
- Lifetime learning credits. The MAGI amount used by taxpayers to determine the reduction in the lifetime learning credit is not adjusted for inflation for tax years after Dec. 31, 2020. The lifetime learning credit is phased out for single tax filers with MAGI more than $80,000 ($160,000 for married couples filing jointly).
2026 tax brackets
The IRS recently released the tax year 2026 annual adjustments, including updated marginal tax rates. The seven tax rates remain the same at 10%, 12%, 22%, 24%, 32%, 35% and 37%, with all income limits adjusted for inflation.
2026 Tax Rate
Single Filers
Married Filing Joint Return
Head of Household
10%
$0 to $12,400
$0 to $24,800
$0 to $17,700
12%
$12,401 to $50,400
$24,801 to $100,800
$17,701 to $67,450
22%
$50,401 to $105,700
$100,801 to $211,400
$67,451 to $105,700
24%
$105,701 to $201,775
$211,401 to $403,550
$105,701 to $201,775
32%
$201,776 to $256,225
$403,551 to $512,450
$201,776 to $256,200
35%
$256,226 to $640,600
$512,451 to $768,700
$256,201 to $640,600
37%
$640,601 or more
$768,701 or more
$640,601 or more
Be prepared for new and potential tax law changes
To make the most effective long-term financial decisions, consider working with a tax and financial professional to review how new laws, including permanent and temporary changes to the tax code, affect your financial plan.
Learn how we can help you design a plan to grow and protect your wealth.
Tags:
Explore more
One Big Beautiful Bill Act: Key changes in the TCJA extension
The new tax act makes many of the Tax Cuts and Jobs Act provisions permanent. Here’s what to know.
Put your taxes in perspective.
A thoughtful approach to taxes and their impact can help keep your financial plan on track.
Start of disclosure content
Start of disclosure content
Equal Housing Lender. Deposit products are offered by U.S. Bank National Association. Member FDIC. Mortgage, Home Equity and Credit products are offered by U.S. Bank National Association. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice.