As we approach the 2025 tax year, it’s important to stay informed about updates that could impact your filing. At Sisters Tax Prep, we’re committed to making sure our clients are not only prepared but empowered with the knowledge they need to make the best financial decisions.
Here’s a look at some of the most notable changes you can expect when filing your 2025 taxes in early 2026.
Standard Deduction Increases
The IRS adjusts the standard deduction annually to account for inflation. For the 2025 tax year, the standard deduction is projected to increase to the following amounts:
- Single filers: Approximately $14,600
- Married filing jointly: Approximately $29,200
- Head of household: Approximately $21,900
This increase means many taxpayers will be able to reduce their taxable income without needing to itemize deductions.
Potential Expansion of the Child Tax Credit
There is ongoing discussion in Congress about enhancing the Child Tax Credit. Proposed changes could include a higher refundable amount and expanded eligibility for lower-income households. As of now, the credit remains at $2,000 per qualifying child, with up to $1,600 refundable, but this may change before tax season begins.
We are closely monitoring this legislation and will provide updates as they become available.
Adjustments to Tax Brackets
To keep up with inflation, the income thresholds for federal tax brackets will shift slightly in 2025. These adjustments are designed to prevent taxpayers from being pushed into higher tax brackets due to cost-of-living increases.
For example, a single filer in the 12% tax bracket may see the upper limit increase from $44,725 (in 2024) to around $47,000 in 2025. This can result in more take-home pay and potentially lower tax liability for many individuals.
Higher Retirement Contribution Limits
The IRS is expected to raise contribution limits for retirement accounts in 2025. These changes help taxpayers increase their long-term savings while reducing taxable income:
- 401(k) contributions: Projected limit of $23,000
- IRA contributions: Expected to increase to $7,500, with additional catch-up contributions allowed for those over 50
Maximizing retirement contributions is one of the most effective ways to lower your tax burden while investing in your financial future.
Expanded Clean Energy and EV Credits
In line with federal initiatives to encourage energy efficiency, taxpayers may see expanded eligibility for clean energy tax credits. If you install solar panels, upgrade your HVAC systems, or purchase an electric vehicle in 2025, you may qualify for significant tax incentives. Documentation and compliance with IRS guidelines will be essential, so it’s best to plan ahead.
Digital Payment Platforms and 1099-K Reporting
The IRS is expected to tighten enforcement of 1099-K reporting requirements for third-party payment networks such as Venmo, PayPal, Cash App, and Zelle. If you receive business payments through these platforms totaling more than $600 annually, you may receive a 1099-K and be required to report the income.
This update is especially relevant for small business owners, freelancers, and anyone with a side hustle.
IRS Technology Improvements
The IRS continues to modernize its digital infrastructure. While this is intended to improve service and security, it also means more notices and communication may shift online. It’s important to stay vigilant for phishing scams and verify the authenticity of all correspondence.
Final Thoughts
Every tax season brings new rules and considerations. The key to a smooth and successful filing experience is preparation. At Sisters Tax Prep, our goal is to ensure you’re not just compliant — you’re confident.
Whether you’re an individual filer, a small business owner, or managing multiple income streams, we’re here to guide you through the process and help you take advantage of every opportunity.
If you have questions about how these changes could affect your 2025 return, we encourage you to schedule a consultation with us.
Sisters Tax Prep — professional, personal, and prepared to help you succeed.