IRS changes for 2025 can boost paychecks, lower taxes
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New tax brackets and standard deductions are now in effect, which will slightly boost paychecks and lower income tax for many Americans.
Why it matters: The IRS changes, which include other tax provisions, increased by the smallest amount in recent years.
The big picture: The Internal Revenue Service made a few changes to account for inflation, including raising contribution limits for tax-deferred retirement plans in 2025 and a 3-cent increase to the mileage rate.
- The higher limits to 401(k) plans can help people save more for retirement, which in many cases will help lower their income tax.
- The new tax adjustments apply to tax returns filed in 2026.
2025 income tax brackets
Zoom in: By adjusting the tax brackets — as the IRS does every year — it is attempting to stop "bracket creep," which happens when inflation pushes taxpayers into a higher income tax bracket without an increase in real income. (See chart below.)
2025 tax withholding
The IRS also changed the 2025 tax withholding tables, which determine how much money employers should withhold from employee wages in paychecks for federal taxes.
Standard deduction for 2025 tax year
The 2025 tax year standard deduction for married couples filing jointly rises to $30,000 — an $800 increase from $29,200 for the 2024 tax year.
- For single taxpayers, the standard deduction is $15,000, a $400 increase from the 2024 deduction of $14,600.
- For heads of households, the standard deduction will be $22,500, a $600 increase from the 2024 tax year amount.
Estate tax credits 2025
The IRS said estates of people who die during 2025 have a basic exclusion amount of $13.99 million, up from $13.61 million for estates of people who died in 2024.
- Annual exclusion for gifts increases to $19,000 for the calendar year 2025, up from $18,000 for the calendar year 2024.
401(k) contribution limit increases
Americans can contribute up to $23,500 into 401(k), 403(b) and most 457 plans — $500 more than the $23,000 contribution limit for 2024, the IRS said in a November news release.
- The limit on annual contributions to an IRA remains $7,000 like in 2024.
The IRA catch-up contribution limit for individuals aged 50 and over remains at $1,000 for 2025, the IRS said.
- For 401(k) and most other plans, the catch-up contribution limit for employees 50 and over is $7,500 for 2025.
Yes, but: The IRS said a "higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans."
- For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500.
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