2025 Key Tax Numbers

Tax Year: 2025

NEW FOR 2025 through 2028: Enhanced Deduction for Seniors

For taxpayers who have attained the age of 65, a personal exemption is available in the amount of $6,000 and is reduced by 6% of the amount that Modified Adjusted Gross Income (MAGI) exceeds $150,000 for married filing jointly and $75,000 for all others. This exemption is fully phased out at $250,000 for married filing jointly filers and $175,000 for all others. To determine the amount of your Enhanced Deduction for Seniors, use Part V of Schedule A.

MAGI is used to determine if you qualify for certain tax benefits; it does not appear on your tax return (Form 1040), it must be calculated.

How to calculate MAGA:

Start with your AGI shown on Form 1040 (line 11a). Then, add back certain tax deductions to arrive at MAGI (e.g. student loan interest, IRA contributions, tax exempt interest, foreign earned income exclusions,non-taxable social security benefits, employer-provided adoption benefits). Keep in mind, different tax benefits may require different MAGI calculations (e.g. one for IRA eligibility, another for educations credits).

Tax Year: 2025

• Employees:
  • An employee's share of the Social Security tax withheld from gross wages is 6.2%. The employer's share of the Social Security tax on an employee's gross wages is also 6.2%. The combined Social Security tax rate is 12.4%.
  • The 2025 Social Security wage base is $176,100 (the maximum Social Security tax withheld should not exceed $10,918).
  • The employees share of Medicare tax withheld from gross wages is 1.45%. The employer's share of Medicare tax on an employee's gross wages is also 1.45%. The combined Medicare tax rate is 2.9%. Unlike the Social Security tax, there is no limitation on the amount of gross wages subject to the Medicare tax.
• Self-employed:
  • On Schedule SE for 2025, the Self-employment tax rate is 15.3%, which equals 100% of the Social Security rate of 12.4% plus 100% of the Medicare tax rate of 2.9%.
  • For 2025, the 15.3% rate applies to earnings from both self-employment and wages from a job up to $176,100. Only 92.35% (.9235) of self-employment earnings are subject to the 15.3%  rate. Keep in mind, if you have wages from a job, you subtract your gross wages from the $176,100 wage base because your employer withheld your share of Social Security tax from your gross wages (6.2% x gross wages).

  Example #1: Schedule SE Computation - Self-employment income only:

  Schedule SE:

  • Lines 2 / 3: Net profit $175,000
  • Lines 4a / 4c / 6: $161,613 (.9235 x $175,000 on line 3)
  • Line 7: $176,100 (wage base preprinted on Schedule SE)
  • Lines 8d: $0.00
  • Line 9: $176,100 (subtract line 8d from line 7)
  • Line 10: Social Security tax: $20,040 (.124 x $161,613 - smaller of line 6 or line 9).
  • Line 11: Medicare tax: $4,687 (.029 x $161,613 - line 6)
  • Line 12: Self-employment tax: $24,727 (line 10, $20,040 plus line 11, $4,687)
  • Line 13: Deduction for one-half of self-employment tax: $12,364 (50% x $24,727)

  Example #2: Schedule SE Computation - Self-employment income PLUS W-2 wages from a job:

  1. Schedule C, line 31 Net profit: $175,000

  2. W-2 Gross Wages from a job: $25,000

  Schedule SE:

  • Lines 2 / 3: Net profit $175,000
  • Lines 4a / 4c / 6: $161,613 (.9235 x $175,000 on line 3)
  • Line 7: $176,100 (wage base preprinted on Schedule SE)
  • Lines 8d (8a - 8c): $25,000 (W-2 gross wages)
  • Line 9: $151,100 (subtract line 8d from line 7)
  • Line 10: Social Security tax: $18,736 (.124 x $151,100 - the smaller of line 6 or line 9).
  • Line 11: Medicare tax: $4,687 (.029 x $161,613 - line 6)
  • Line 12: Self-employment tax: $24,727 (line 10, $20,040 plus line 11, $4,687)
  • Line 13: Deduction for one-half of self-employment tax: $12,363 (50% x $24,727 line 12)

  Deduction for Half of Self-employment Tax:

  The deduction for half of the self-employment tax is an above-the-line deduction , which means it is subtracted from gross income in arriving at adjusted gross income (AGI). You do not have to itemize your deductions to claim an above-the-line deduction. Enter this deduction on Schedule 1 (Form 1040 or Form 1040-SR), Part II, Line 15, Deductible part of self-employment tax.

• Additional 0.9% Medicare Tax on High Income Earners:
  • The additional 0.9% Medicare tax applies only to earnings above the following thresholds:
    • $250,000 for married persons filing jointly
    • $200,000 or single persons, heads of households and qualifying surviving spouses
    • $125,000 for married persons filing separately
  • If you're married and file a joint return, you must combine your and your spouse's wages, other compensation (i.e. tips, taxable fringe benefits, etc.) and self-employment income to determine if the threshold is exceeded.
  • If you had only self-employment earnings in 2025, and no wages, you figure your liability for the 0.9% tax in Part II of Form 8959, Additional Medicare Tax.
  • If you had wages and tips or other taxable employee compensation treated as wages, but not earnings from self-employment, the 0.9% tax applies on Part I of Form 8959 to the excess wages over your filing threshold. For example, if your 2025 wages are $225,000 and you're single, the tax applies to the $25,000 wages over the $200,000 threshold, for a tax of $225 (.009 x $25,000).
  • Enter the additional tax of $225 on Line 11 of Schedule 2 (Form 1040 or 1040-SR) whether or not your employer withheld th 0,9% tax. Withholdings for the 0.9% tax are separated out from regular Medicare withholdings on Part V of Form 8959 and added to your federal income tax withholdings on Line 25c of Form 1040 or 1040-SR.
  • If you had wages and net earnings from self-employment in 2025, do the following:
  • First, determine if the 0.9% tax applies to your wages in Part I of Form 8959.
  • Next, reduce your threshold amount by your wages to get a reduced threshold amount that is used to determine if the tax applies to the self-employment income.
  • A net loss from self-employment does not offset wages.
  • The 50% deduction for self-employment tax does not apply to the 0.9% Additional Medicare Tax.

Tax Year: 2025

• Married filing Joint return: $31,500
• Qualifying / Surviving Spouse: $31,500
• Head of household: $23,625
• Single: $15,750
• Married filing separately: $15,750
• Dependents - individuals under age 65 (or who are blind) who may be treated as dependents by other taxpayers are limited to a standard deduction equal to the greater of (1) $1,350, or (2) earned income PLUS $450, but no more than the basic standard deduction for the dependent's filing status. For example, the basic standard deduction for a single tax payer is $1,350 for 2025.
• Additional Deduction if Age 65 or Older, or Blind.
  Note: If you turned 65 on January 1, 2025, you are considered to be 65 as of December 31, 2024 for purposes of claiming this deduction. The larger deduction for blindness is allowed regardless of age.
  • Married: allowed for each-spouse, filing jointly or separately (if one spouse itemizes deductions, the other spouse must do the same):
    • $1,550 ($3,100 for age and blindness)
  • Surviving Spouse:
    • $1,550 ($3,100 for age and blindness)
  • Single or head of household:
    • $1,950 ($3,900 for age and blindness)

Tax Year: 2025

Tax Year: 2025

• Business:
  • 70 cents/mile
• Medical and moving for military personnel:
  • 21 cents/mile (unchanged from 2024)
    • This deduction only applies to members of the U.S. Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station.
• Charitable volunteers: 14 cents per mile

Tax Year: 2025

• Free parking, transit passes and van pooling: $325 per month

Tax Year: 2025

Contributions to a traditional IRA or Roth IRA can be made regardless of age, provided you have earned income (or other eligible income).

Traditional IRAs:

• Traditional IRA contribution limit: $7,000
• Additional contribution if age 50 or older: $1,000
• Deduction phaseout for active plan participant:
  • Single or head of household: $79,000 - $89,000
  • Married filing jointly, two participants: $126,000 - $146,000
  • Married filing jointly, one participant:
    • Participant spouse: $126,000 - $146,000
    • Non-participant spouse: $236,000 - $246,000
    • Married filing separately, live together, either participates:
      • $0 - $10,000
  • Married filing separately, live apart all year:
    • Participant spouse: $79,000 - $89,000
    • Non-participant spouse: no phaseout

Roth IRAs:

• Roth IRA contribution limit: $7,000
• Additional contribution if age 50 or older: $1,000
• Roth IRA Contribution limit phaseout range:
  • Single, head of household: $146,000 - $161,000
  • Married filing separately, live apart all year: $146,000 - $161,000
  • Married filing jointly, or qualifying surviving spouse: $230,000 - $240,000
  • Married filing separately, live together at any time: $0 - $10,000

Tax Year: 2025

• 401(k), 403(b), 457 plans: $23,500
• Salary-reduction SEP: $23,500
• SIMPLE IRA: $16,500
• Additional contribution if age 50 or older with special amounts available for ages 60, 61, 62, and 63 (catch-up contributions):
  • 401(k), 403(b), governmental 457 and SEP plans: $7,500
  • SIMPLE IRA: $3,850

Tax Year: 2025

• American Opportunity credit limit-per student: $2,500
• Lifetime Learning credit limit-per-taxpayer: $2,000
• Phaseout of American Opportunity credit:
  • Married filing jointly: $160,000 - $180,000
  • Single, head of household, or qualifying surviving spouse: $80,000 - $90,000
• Phaseout of Lifetime Learning credit:
  • Married filing jointly: $160,000 - $180,000
  • Single, head of household, qualifying surviving spouse: $80,000 - $90,000
• Student loan interest deduction limit: $2,500
  • Phaseout of deduction limit:
    • Married filing jointly: $170,000 - $200,000
    • Single, head of household, qualifying surviving spouse: $85,000-$100,000
• Coverdell ESA limit: $2,000
  • Phaseout of limit:
    • Married filing jointly: $190,000 - $220,000
    • All others: $95,000 - $110,000

Tax Year: 2025

• Limit on premium allowed as medical expense:
  • Age 40 or under: $480
  • 41 through 50: $900
  • 51 through 60: $1,800
  • 61 through 70: $4,810
  • Over 70: $6,020

Tax Year: 2025

For qualifying property placed in service in 2025, first-year expensing is allowed up to a limit of $2,500,000. The limit begins to phase out if the total cost of qualifying property exceeds $4,000,000.

Section 179 Deduction Phase-out:

If the cost of qualifying property placed in service in 2025 is more than $4,000,000, you reduce the $2,500,000 expensing limit dollar-for-dollar for each dollar the cost of qualifying property exceeds $4,000,000 (but not below zero).

Example:

• You place machinery in service during 2025 costing $4,120,000
• The 2025 expensing limit is $2,500,000
• The expensing limit of $2,500,000 must be reduced by $120,000 (2025 cost of property $4,120,000 - $4,000,000 cost limitation).
• The reduced expensing limit is $2,380,000 ($2,500,000 - $120,000) is entered on Form 4562 in Part 1, line 5 (labeled: Dollar limitation for tax year).

If the cost of the property was $6,500,000 or more, no first-year expensing deduction would be allowed for 2025 because it would be completely phased out ($6,500,000 - $4,000,000) = $2,500,000 expensing limit.

2025 Bonus Depreciation (also called a "Section 168(k) allowance" and a "special depreciation allowance"):

Bonus depreciation is an additional first-year depreciation allowance equal to a set percentage of the adjusted basis of eligible property. The percentage for bonus depreciation for 2025 is 40% for property placed in service on or prior to January 19, 2025. Property placed in service after January 19,2025 is eligible for 100% bonus depreciation, but taxpayers may elect to apply 40% bonus depreciation in 2025.

Bonus depreciation is fully deductible for alternative minimum tax purposes; no adjustment is required.

Qualified improvement property has a 15-year recovery period. As such, it qualifies for bonus depreciation. Qualified improvement property purchased on or before January 19, 2025 is limited to bonus depreciation of 40%; if acquired after January 19, 2025, bonus depreciation is 100%. Qualified improvement property is any improvement to an interior part of a building that is nonresidential realty and is made after the date the building was placed in service. Note that, any improvements for the enlargement of the building, an elevator or escalator, or changes to the internal framework of the building, are not qualified improvement property.

Electing Out of Bonus Depreciation:

Bonus depreciation is automatic for qualified property; the IRS applies it by default. This means, you don't have to take any special action to claim it. However, you may elect out of claiming bonus depreciation. If you fail to make an election not to claim bonus depreciation, you are deemed to have claimed it even if you did not, and must reduce the basis of the property by the amount of bonus depreciation that could have been claimed.

You may elect out of the bonus depreciation by attaching a statement to your return specifying the asset class which you do not want to claim bonus depreciation. For example, you can elect out of bonus depreciation for all five-year property while claiming it for seven-year property.

Report bonus depreciation for most property on Form 4562, Part II labeled "Special Depreciation Allowance and Other Depreciation". For "Listed Property" use Part V of Form 4562 (automobiles, certain other vehicles, certain aircraft, and property used for entertainment, recreation, or amusement.)

Tax Year: 2025

For 2025, if you itemize charitable contributions on Schedule A, you may deduct donations to religious, charitable, educational, and other philanthropic organizations that have been approved to receive deductible contributions. The deduction for cash donations is generally 60% of adjusted gross income (AGI). Lower ceilings apply to most property donations and contributions to foundations. Tax benefit depends on your marginal tax bracket. For example, if you donate $1,000 and you're in the 24% tax bracket, it reduces your taxes by $240. Keep receipts! A cash donation will be disallowed if it's not supported by a canceled check, account statement or written receipt from the charity.

For donations of $250 or more, you must have a written acknowledgment from the organization that indicates whether you received goods or services in return for your donation. In addition to the acknowledgment, you need a canceled check for a cash donation of $250 or more.

If you deduct a donation for property valued at more than $500, you must substantiate the contribution on Form 8283 and attach it to Form 1040 or Form 1040-SR. If the value you claimed for property exceeds $5,000, you generally must get a written appraisal.

If you donate a vehicle valued at over $500, you must attach Copy B of Form 1098-C to your return. Your deduction is generally limited to the gross sales proceeds received by the charity on a sale of the vehicle, even if you could susbstantiate a higher fair market value.

Tax Year: 2025

For 2025, the maximum child tax credit for a child under age 17 is $2,200. The credit begins to phase out when modified adjusted gross income (MAGI) exceeds $400,000 on a joint return or $200,000 for all other filers. There is an additional child tax credit that can be claimed if the child tax credit otherwise allowed is limited by tax liability; the refundable amount may not exceed $1,700 per qualifying child. The credit for other dependents is unchanged (i.e., not refundable and limited to $500 per dependent). The maximum child tax credit is now indexes for inflation.

Refundable Tax Credit vs Nonrefundable Tax Credits:

Tax credits reduce your tax liability dollar-for-dollar.

Refundable tax credit: This type of credit is called refundable because not only does it reduce your tax liability dollar-for-dollar, if the amount of the credit exceeds your tax liability you get a refund of the excess amount. In fact, if your tax liability is zero, you get a refund of the entire credit amount. For example, if you owe $500 in federal income taxes and you have an $800 refundable tax credit, you would get a refund of $300.

Nonrefundable tax credit: On the other hand, if owe $500 in federal income taxes and have an $800 nonrefundable tax credit, your $500 tax liability would be reduced to zero, but you would NOT get a refund of $300, the excess amount of the tax credit.

For 2025, the child and dependent care credit is nonrefundable. Qualifying expenses taken into account in figuring the credit are $3,000 for one qualifying individual and $6,000 for two or more qualifying individuals. The credit ranges From 35% down to 20%, depending on adjusted gross income. The exclusion for dependent care under an employer's dependent care assistance plan is $5,000 ($2,500 if married filing separately).

Tax Year: 2025

For 2025 the maximum EIC amount is $4,328 for one qualifying child, $7,152 for two qualifying children, $8,046 for three or more qualifying children, and $649 for taxpayers who have no qualifying child. The phaseout ranges for the EIC have been adjusted for inflation. The excessive investment income limit is $11,950.

Tax Year: 2025

For 2025, the premium tax credit is allowed even if household income exceeds 400% of the federal poverty line. The required contributions are reduced.

If you purchased health care coverage in 2025 through a government exchange (The Health Insurance Marketplace) and your household income is at least 100% of the federal poverty line (FPL), you may be able to claim a tax credit on Form 8962 when you file your 2025 return. Those with household income above 400% of the FPL could not claim the credit before 2021, but for 2021 through 2025 the 400% limit does not apply.

If you received an advance of the credit that went directly to your insurance company and it was applied to your monthly premiums, you must complete Form 8962 to reconcile the advance payments you received with the amount of the credit that you were actually entitled to. You may have received advance payments that were either more or less than what you were actually entitled to receive. This could happen depending on changes to your income or family composition between the time you received the advance payments and when you file your 2025 return.

If your allowable credit on Form 8962 exceeds the advance payments, the excess amount is called the Net Premium Tax Credit, which can be claimed as a refundable credit on Line 9 of Schedule 3 (Form 1040 or 1040-SR), which means it will be paid to you even if it exceeds your tax liability.

However, if the advance payments were more than the allowable credit, you must pay back the excess, up to a limit. The repayment is an additional tax that must be reported on Schedule 2 (Form 1040 or 1040-SR). To complete Form 8962, you'll need to enter amounts shown on Form 1095-A, which you will receive from the Marketplace through which you obtained coverage. Form 1095-A shows a month-by-month breakdown of the coverage premiums for you and your family as well as the advance payments you received.