The IRS has announced several key updates for 2025 that affect taxes, retirement contributions, and savings limits. Understanding these changes can help you make smarter financial decisions.
401(k) and Retirement Contributions:
Starting in 2025, the annual limit on employee deferrals to a traditional IRA will be adjusted. Additionally, the limits on catch-up contributions for employees aged 50 and older will also increase.
Income Tax Brackets:
The IRS has announced changes to tax brackets, affecting taxpayers with incomes above $400,000. These changes aim to reduce taxes for lower- and middle-income individuals.
Tax Credits and Deductions:
There will be no change in the earned income tax credit (EITC) or the child tax credit. However, some deductions may be subject to phase-out limits due to inflation adjustments.
Health Insurance Premium Tax Credits:
For 2025, the premium tax credit for health insurance will increase based on inflation rates.
Tax Filing and Payment Deadlines:
The IRS has confirmed that the deadline for filing individual tax returns (Form 1040) remains unchanged at April 15, 2025. However, the payment due date for quarterly estimated taxes may change.
Other Notable Changes:
– The limits of state and local income tax deductions will be adjusted based on inflation rates.
– There will be no change in the standard mileage rate for business use of a vehicle.
– The IRS has confirmed that it will continue to prioritize taxpayer service, including expanded hours at Taxpayer Assistance Centers (TACs).
To ensure you’re aware of these updates and make informed decisions about your finances, consult with a qualified tax professional or financial advisor.
Source: https://www.kiplinger.com/retirement/key-2025-irs-updates-what-you-need-to-know