Tax Numbers and Inflation Adjustments for 2025
By Anne ZavagliaPosted on January 14th, 2025
The Internal Revenue Service makes cost-of-living and annual inflation adjustments each year. The changes affect contribution limits for retirement plans and various tax deductions, exclusion, exemption, and threshold amounts. Here are a few of the key adjustments for 2025.
Marginal Tax Brackets
After seeing large increases over the last few years, the annual inflation adjustments for federal marginal income tax brackets increased by 2.8% for 2025.

Standard Deduction
The standard deduction also increased by 2.8%, moving from $14,600 in 2024 to $15,000 for 2025. A taxpayer can choose to itemize certain deductions or claim a standard deduction on the federal income tax return. Since the TCJA most filers use choose the standard deduction.

Special rules apply for those who can be claimed as a dependent by another taxpayer.
Individual Retirement Accounts (IRAs)
The combined annual limit on contributions to traditional and Roth IRAs will remain $7,000 in 2025, with individuals aged 50 or older able to contribute an additional $1,000.

If during the year either an employee, or their spouse, was covered by a retirement plan at work, the deduction to a traditional IRA may be reduced, or phased out until it is eliminated, depending on filing status and income. If neither person is covered by a retirement plan at work, the phase-outs of the deduction do not apply.
The limit on nondeductible contributions to a traditional IRA is not subject to phaseout based on MAGI.
The limit on contributions to a Roth IRA also phases out for certain modified adjusted gross income (MAGI) ranges. Taxpayers may be able to make non-deductible contributions to a traditional IRA and convert to a Roth IRA as a workaround.

Note: The 2025 phaseout range is $236,000-$246,000 when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered. The phaseout range is $0-$10,000 when the individual is married filing separately and either spouse is covered by a workplace plan.
Employer-Sponsored Retirement Plans
Employees who participate in 401(k), 403(b), and most 457 plans may defer up to $23,500 in compensation in 2025. Employees aged 50 or older can defer up to an additional $7,500 in catch-up contributions. New for 2025 is an increased contribution limit for those aged 60 to 63.

Employees participating in a SIMPLE retirement plan can defer up to $16,500 and those age 50 or older can defer up to an additional $3,500.

The combined employee and employer contributions cannot exceed $70,000 for 2025. Roth 401(k) contribution limits are the same as those for traditional 401(k) plans.
Estate, Gift, and Generation-Skipping Transfer Tax
- The annual gift tax exclusion (and annual generation-skipping transfer tax exclusion) for 2025 is $19,000, an increase of $1,000 from 2024.
- The gift and estate tax lifetime exclusion amount (and generation-skipping transfer tax exemption) for 2025 is $13,990,000. That amount is scheduled to be cut in half to pre-2018 levels starting in 2026.
Kiddie Tax: Child’s Unearned Income
Under the kiddie tax, a child’s unearned income above $2,600 in 2025 is taxed using their parents’ tax rates. The Kiddie tax applies to individuals 18 years of age or under or dependent full-time students under the age of 24.