Projected Brackets, Standard Deductions And More

The U.S. Bureau of Labor Statistics reported that the consumer price index (CPI) increased by 0.2% on a seasonally adjusted basis in August after rising the same level in July—over the last 12 months, the all items index increased 2.5% before seasonal adjustment. You won’t just feel the impact of those boosts in your wallet; you’ll also see them on your tax forms. Those higher numbers (although slight) push out deduction limitations and will result in upward adjustments to tax brackets and increases to other key thresholds.

According to Bloomberg Tax & Accounting, inflation-adjusted amounts in the tax code will increase by 2.8% from the 2024 numbers. This is about half the increase that taxpayers saw in 2024, and a significant drop from the 7.1% increase in 2023.

How does that translate to dollars? Here’s a look at the projected numbers for the tax year 2025, beginning January 1, 2025. These are not the tax rates and other numbers for 2024 (you’ll find the official 2024 tax rates here).

Tax Brackets

Here are what the rates are expected to look like in 2025:

Capital Gains

Capital gains rates will not change in 2024, but the brackets for the rates will change. Most taxpayers pay a maximum 15% rate, but a 20% tax rate applies to the extent that taxable income exceeds the thresholds set for the 37% ordinary tax rate. Exceptions also apply for art, collectibles, and section 1250 gain (related to depreciation).

Bloomberg Tax anticipates that the maximum zero rate amounts and maximum 15% rate amounts will break down as follows:

Personal Exemption Amounts

Due to the Tax Cuts and Jobs Act, there will be no personal exemption amounts in 2025. Personal exemptions used to decrease your taxable income before you determined the tax due. You were generally allowed one exemption for yourself (unless you could be claimed as a dependent by another taxpayer), one exemption for your spouse if you filed a joint return, and one personal exemption for each of your dependents—but that’s no longer the case.

Standard Deduction Amounts

Here are the projected standard deduction amounts for 2025:

For comparison, the standard deduction amounts for single taxpayers and married taxpayers filing separately was $14,600 in 2024. The standard deduction for married couples filing jointly was $29,200 in 2024, while heads of household saw a $21,900 standard deduction in 2024.

Also, for 2025, it’s predicted that the standard deduction for an individual who may be claimed as a dependent by another taxpayer will not be more than:

1. $1,350, or
2. the sum of $450 plus the individual’s earned income.

The additional standard deduction per person for the aged or the blind will be $1,600. That amount will increase to $2,000 if the individual is unmarried and not a surviving spouse.

Alternative Minimum Tax (AMT)

The AMT exemption rate is also subject to inflation. Bloomberg Tax anticipates that the exemption amounts will look like this in 2025:

In 2025, the excess taxable income above which the 28% tax rate applies will likely be $119,550 for married taxpayers filing separate returns and $239,100 for all other non-corporate taxpayers.

Kiddie Tax

Your child must pay taxes on their unearned income in 2025, but if that amount is more than $1,350 but less than $13,500, you may be able to elect to include that income on your return rather than file a separate return for your child.

Maximum Amount of Refundable Child Tax Credit

There’s a lot of chatter in Congress about making changes to the child tax credit, but while the bill to expand it passed the House, it failed to advance in the Senate. If nothing changes, the maximum amount of the child tax credit that may be refundable is projected to be $1,700 in 2025.

Fringe Benefits—Transportation

In 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking is predicted to increase to $325, an increase of $1o from the 2024 amount.

Student Loan Interest

For 2025, Bloomberg predicts that the $2,500 maximum deduction for interest paid on qualified education loans will begin to phase out for taxpayers with modified adjusted gross income above $85,000 ($170,000 for joint returns) and will completely phase out for taxpayers with modified adjusted gross income of $100,000 or more ($200,000 or more for joint returns).

Health Savings Accounts (HSAs)

Bloomberg predicts that in 2025, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan (HDHP) will be $4,300 ($8,550 for a family).

For 2025, an HDHP will be defined as a health plan with an annual deductible that is not less than $1,650 for self-only coverage ($3,300 for a family). The annual out-of-pocket expenses, including deductibles, co- payments, and other amounts—but not premiums—cannot exceed $8,300 for self-only coverage ($16,600 for a family).

Medical Savings Accounts (MSA)

For 2025, a high-deductible health plan (HDHP) is predicted to be one that, for participants who have self-only coverage in an MSA, has an annual deductible that is not less than $2,850 but not more than $4,300.

For participants with family coverage, an annual deductible that is not less than $5,700 but not more than $8,550 in 2025.

For self-only coverage, the maximum out-of-pocket expense amount is $5,700 in 2025, while the amount for out-of-pocket expense for family coverage is predicted to be $10,500.

IRAs & Other Retirement Accounts

For 2025, Bloomberg predicts that the total contributions you make to all of your traditional IRAs and Roth IRAs can’t be more than $7,000 ($8,000 if you’re age 50 or older) or your taxable compensation for the year, whichever is smaller. Those numbers are the same as for 2024.

For 2025, the dollar limits used to determine the deduction under section 219(g) for active participants in certain pension plans are expected to be $79,000 for single taxpayers, $126,000 for married taxpayers filing jointly, and zero dollars for married taxpayers filing separately.

Charitable Distributions

A qualified charitable distribution (QCD) allows you to roll funds directly from your IRA to a qualified charity. Those amounts can be used to satisfy your required minimum distributions (RMDs) for the year, and the amount donated is excluded from your taxable income—you won’t even have to itemize to do it. The total amount of QCDs that you can exclude from your gross income is predicted to increase to $108,000 in 2025, up from $105,000 in 2024.

You can make a one-time election for a QCD to a split-interest entity like a charitable trust. That amount was initially $50,000 but is adjusted for inflation and is predicted to be $54,000 in 2025.

Roth IRAs

Taxpayers who wish to contribute to a Roth IRA are subject to phaseout amounts. (In this context, phase-outs mean that the eligible contribution amount is reduced as your income increases.)

Bloomberg predicts those will look like this in 2025:

Foreign-Earned Income Exclusion

In 2025, the foreign-earned income exclusion amount is predicted to be $130,000 (up from $126,500 in 2024).

Federal Estate Tax Exclusion

The federal estate tax exclusion for decedents dying in 2025 will increase to $13,990,000 per person or $27,980,000 per married couple.

Gift Tax Exclusion

The annual exclusion for federal gift tax purposes is predicted to increase to $19,000 in 2025 (up from $18,000 in 2024). That means you can gift $19,000 per person to as many people as you want with no federal gift tax consequences in 2025; if you split gifts with your spouse, that total is $38,000.

The limit on amount of gifts to a spouse who is not a U.S. citizen is projected to be $190,000 in 2025.

Section 199A Deduction

Sole proprietors and owners of pass-through businesses like limited liability corporations (LLCs), S corporations, and partnerships may be eligible for a deduction of up to 20% to lower the tax rate for qualified business income. The deduction is subject to threshold and phased-in amounts. For 2025, those amounts should look like this:

More Information

Remember that these are just projections. The IRS will publish the official tax brackets and other tax numbers for 2025 later this year, likely in October.

“Year after year, our annual report equips tax professionals and taxpayers with crucial forecasts to prepare for the forthcoming year, ahead of the IRS’s official declaration,” said Heather Rothman, Vice President, Analysis & Content, Bloomberg Tax & Accounting. “As inflation continues to impact the tax code, Bloomberg Tax & Accounting offers the research and tools to solve day-to-day workflow issues by providing intelligence exactly where users need it.”

The full report is available here.

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