United States Tax Change Highlights for 2025
New IRA account for children, new checkboxes for location of main home and deceased taxpayers on Form 1040, new information boxes for dependants, new dedicated checkboxes or entry spaces for write-in information, new form for digital asset sales, four new deductions for itemizers or non-itemizers, increase to state and local tax deduction limit, updated reporting requirements for Form 1099-K.
Who Must File
Generally, the amount of income you can receive before you must file a return has increased.
Due Date of Return
This year Form 1040 and 1040-SR are due April 15, 2026.
New IRA Account and Form 4547
Parents, guardians, and other authorized individuals can now elect to establish a new type of individual retirement account for the exclusive benefit of certain children. If the child was born after 2024 and before 2029, is a U.S. citizen, and meets certain other requirements, the authorized individual may also elect to receive a $1,000 pilot program contribution to the account. Both elections can be made on Form 4547, which can be filed at the same time as the authorized individual's 2025 income tax return. For more information, see Form 4547 and its instructions.
Standard Deduction Amount Increased
The standard deduction amounts for 2025 have increased for all filers. The new amounts are:
- Single or Married filing separately – $15,750;
- Married filing jointly or Qualifying surviving spouse – $31,500; and
- Head of household – $23,625.
Higher Catch-Up Contribution Limit for Ages 60 to 63
If, at the end of 2025, you were at least age 60, but younger than age 64, and you participated in a deferred compensation plan (including most 401(k), 403(b), and governmental 457 plans, and the governmental Thrift Savings Plan), a higher catch-up contribution limit may apply to you. For 2025, this higher catch-up contribution limit is $11,250. For more information, contact your plan administrator and see Pub. 590-A.
Main Home was in the United States
If your main home (and spouse if filing a joint return) was in the United States for over half of 2025, check the box on the front of Form 1040 or 1040-SR. Providing this information will help the IRS determine your eligibility for certain tax benefits, including the earned income credit.
Changes to the Dependents Section
The Dependents section now has numbered rows and asks for more information about you and your dependents. This new information is being asked to help the IRS determine your eligibility for certain tax benefits, including the child tax credit, the credit for other dependents, and the earned income credit.
Write-in Information
Beginning in 2025, most of the words, codes, and/or dollar amounts that are used to explain an item of income or deduction, and that you previously had to enter next to specific lines, now have a dedicated checkbox or entry space.
Death of a Taxpayer
If you need to file a return for someone who died before filing a 2025 return, check the "Deceased" box at the top of Form 1040 or 1040-SR and enter the date of death. For more information, see Death of a Taxpayer in the Instructions for Form 1040 (pdf).
Contributions to a Governmental Paid Family Leave Program
Beginning in 2025, if you made contributions to a governmental paid family leave program, you will now include the full amount of those contributions in your income. If you itemize your deductions on Schedule A (Form 1040), you can include the amounts contributed as part of the state and local taxes that you paid.
Form 1099-DA
If, in 2025, you used a broker to effect the sale of a digital asset, your broker should send you the new Form 1099-DA Digital Asset Proceeds From Broker Transactions reporting the transaction. In 2025, your broker has the option to report your basis in the digital asset on Form 1099-DA but is not required to do so. Even if you receive a Form 1099-DA, you must still answer the digital assets question on page 1 of Form 1040 or 1040-SR. For more information, see the Instructions for Form 1099-DA.
Electronic Payments and Direct Deposit
If you have access to U.S. banking services or electronic payment systems, you should use direct deposit for any refunds. The IRS recommends paying electronically whenever possible. Options to pay electronically include using your bank account with Direct Pay, your debit or credit card, your digital wallet, or your online account. Go to IRS.gov/Payments to see all your payment options.
New Deductions for Itemizers and Non-Itemizers
There are four new deductions beginning in 2025. If eligible, you can claim these deductions regardless of whether you take the standard deduction or itemize deductions on Schedule A (Form 1040). For more information, see the Instructions for Form 1040 (pdf) and the new Schedule 1-A (pdf) used to claim the new deductions:
- No tax on tips. You may be eligible to take a deduction for qualified tips paid to you in 2025. You can't deduct more than $25,000 of those tips. Your deduction will be limited if your modified adjusted gross income is more than $150,000 ($300,000 if married filing jointly). To be eligible, you and/or your spouse who received the tips must have a valid social security number (SSN). If you are married, you must file a joint return.
- No tax on overtime. If you earned qualified overtime, you may be eligible to deduct up to $12,500 ($25,000 if married filing jointly) of your qualified overtime compensation. Your deduction will be limited if your modified adjusted gross income is more than $150,000 ($300,000 if married filing jointly). To be eligible, you and/or your spouse who received the overtime must have a valid SSN. If you are married, you must file a joint return.
- No tax on car loan interest. If you paid or accrued qualified passenger vehicle loan interest on a vehicle you purchased in 2025 for personal use, you may be eligible to deduct up to $10,000 of that interest. Your deduction will be limited if your modified adjusted gross income is more than $100,000 ($200,000 if married filing jointly).
- Enhanced deduction for seniors. If you were born before January 2, 1961, you may be eligible for an enhanced senior deduction. Your deduction will be limited if your modified adjusted gross income is more than $75,000 ($150,000 if married filing jointly). To be eligible, you and/or your spouse must have a valid SSN. If you are married, you must file a joint return. The maximum amount of the deduction is $6,000 ($12,000 if both spouses are eligible).
Deferral of Gain Invested in a Qualified Opportunity Fund (QOF)
Taxpayers who made a deferral election in a QOF that meets the 7-year holding period threshold may be eligible for a basis adjustment. See the Instructions for Schedule D (Form 1040); and Form 8997 Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, and its instructions for additional information regarding QOFs.
Deferred Compensation Contribution Limit Increased
If you participate in a 401(k) plan, 403(b) plan, or the federal government's Thrift Savings Plan, the total annual amount you can contribute for 2025 is increased to:
- $23,500;
- $31,000 if age 50 or older; or
- $37,750 if age 60, 61, 62, or 63 at the end of 2025.
This also applies to most section 457 plans.
State and Local Tax Deduction Limit Increased
The overall limit on the itemized deduction for state and local income, sales, and property taxes has increased to $40,000 ($20,000 if married filing separately) – a significant increase from the $10,000 ($5,000 if married filing separately) allowed for 2024. The overall limit is reduced if modified adjusted gross income is more than $500,000 ($250,000 if married filing separately) but will not be reduced below $10,000 ($5,000 if married filing separately). For more information, see the Instructions for Schedule A (Form 1040).
SSN or Individual Taxpayer Identification Number (ITIN) Needed To Claim the Credit for Other Dependents
Beginning in 2025, to be eligible to claim the credit for other dependents, you, or your spouse if filing jointly, must have a valid SSN or ITIN issued on or before the due date of your return (including extensions).
Changes to the Adoption Credit
Beginning in 2025, the following changes to the adoption credit apply.
- Up to $5,000 of adoption credit is refundable. Up to $5,000 of your adoption credit may be refundable. The amount of the refundable portion is determined separately for each eligible child.
- Parity for Indian Tribal governments. Tribal governments now have parity for special needs adoption determinations. This means that state government and Indian Tribal government determinations of special needs are both recognized for purposes of the adoption credit. For more information, see Form 8839, Qualified Adoption Expenses, and its instructions.
The adoption credit and the exclusion for employer-provided adoption benefits are both $17,280 per eligible child in 2025. The amount begins to phase out if you have modified AGI in excess of $259,190 and is completely phased out if your modified AGI is $299,190 or more.
Election to Pay Tax on Farmland Sale or Exchange in Installments
If your tax year began after July 4, 2025, and you sold or exchanged qualified farmland to a qualified farmer after that date, you can elect to pay the net income tax liability on the sale or exchange in four equal installments. For more information, see the Form 1040 instructions (pdf) for Schedule 2 and Schedule 3. Also, see Form 1062 (draft pdf) Deferral of Tax on Gain From the Sale or Exchange of Qualified Farmland Property to Qualified Farmers and its instructions.
Domestic Research and Experimental Expenditures
Beginning in 2025, taxpayers are allowed to deduct domestic research and experimental expenditures. Alternatively, taxpayers may elect to charge their domestic research and experimental expenditures to a capital account and deduct them ratably over a period of not less than 60 months (beginning with the month in which the taxpayers first realize the benefits from such expenditures).
Health Flexible Spending Arrangements (Health FSAs) Under Cafeteria Plans
For tax years beginning in 2025, the dollar limitation under section 1251(i) on voluntary employee salary reductions for contributions to health FSAs is $3,300.
Delayed Refund for Returns Claiming the ACTC
The IRS cannot issue refunds before mid-February 2026 for returns that properly claim the ACTC. This time frame applies to the entire refund, not just the portion associated with the ACTC.
Standard Mileage Rate
The 2025 rate for business use of a vehicle is 70 cents a mile. The 2025 rate for use of your vehicle to do volunteer work for certain charitable organizations is 14 cents a mile. The 2025 rate for operating expenses for a car when you use it for medical reasons is 21 cents a mile.
Modified Adjusted Gross Income (AGI) Limit for Traditional IRA Contributions
For 2025, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
- More than $126,000 but less than $146,000 for a married couple filing a joint return or a qualifying surviving spouse;
- More than $79,000 but less than $89,000 for a single individual or head of household; or
- Less than $10,000 for a married individual filing a separate return.
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work but you aren't, your deduction is phased out if your modified AGI is more than $236,000 but less than $246,000. If your modified AGI is $246,000 or more, you can't take a deduction for contributions to a traditional IRA. See How Much Can You Deduct in Publication 17.
Modified AGI Limit for Roth IRA Contributions
For 2025, your Roth IRA contribution limit is reduced (phased out) in the following situations.
- Your filing status is married filing jointly or qualifying surviving spouse and your modified AGI is at least $236,000. You can't make a Roth IRA contribution if your modified AGI is $246,000 or more.
- Your filing status is single, head of household, or married filing separately and you didn't live with your spouse at any time in 2025 and your modified AGI is at least $150,000. You can't make a Roth IRA contribution if your modified AGI is $165,000 or more.
- Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than zero. You can't make a Roth IRA contribution if your modified AGI is $10,000 or more. See Can You Contribute to a Roth IRA in Publication 17.
2026 Modified AGI Limits
You can find information about the 2026 contribution and modified AGI limits in Pub. 590-A.
Tax Law Changes for 2026
When you figure how much income tax you want withheld from your pay and when you figure your estimated tax, consider tax law changes effective in 2026. For more information, see Pub. 505.
Alternative Minimum Tax (AMT) Exemption Amount Increased
The AMT exemption amount is increased to $88,100 ($137,000 if married filing jointly or qualifying surviving spouse; $68,500 if married filing separately). The income levels at which the AMT exemption begins to phase out have increased to $626,350 ($1,252,700 if married filing jointly or qualifying surviving spouse).
Updated Reporting Requirements for Form 1099-K
Payment card companies, payment apps, and online marketplaces will be required to send you Form 1099-K only if the amount of your business transactions was more than $20,000 during 2025, and the total number of transactions was more than 200. Last year it was stated that the threshold for 2025 would be $2,500, so this is a significant change.
New Option for Scheduled appointments at Taxpayer Assistance Centers (TACs)
Beginning in 2025, taxpayers with scheduled appointments at TACs may choose to receive appointment confirmations, reminders, and cancellation notices directly via text message on their mobile devices.