IRS and Social Security Updates You Need to Know for 2025

Published on: November 11, 2024

The U.S. government is making several important changes to taxes and Social Security benefits in 2025 to adjust for inflation and the rising cost of living.

These changes impact tax brackets, income deductions, and benefits like the Earned Income Tax Credit (EITC) and Social Security.

Here’s a breakdown of the major updates and what they mean for taxpayers and Social Security recipients.

Changes in IRS Tax Brackets for 2025

The IRS has adjusted tax brackets to reflect the changing economy. While the top tax rate of 37% remains unchanged, income ranges for each bracket have shifted to account for inflation. Below are the new tax brackets for married couples filing jointly and single individuals:

Married Couples Filing Jointly

Under $23,850: Tax rate is 10%
$23,850 to $96,950: $2,385 + 12% of the excess over $23,850
$96,950 to $206,700: $11,157 + 22% of the excess over $96,950
$206,700 to $394,600: $35,302 + 24% of the excess over $206,700
$394,600 to $501,050: $80,398 + 32% of the excess over $394,600
$501,050 to $751,600: $114,462 + 35% of the excess over $501,050
Over $751,600: $202,154.50 + 37% of the excess over $751,600

Single Individuals

Under $11,925: Tax rate is 10%
$11,925 to $48,475: $1,192.50 + 12% of the excess over $11,925
$48,475 to $103,350: $5,578.50 + 22% of the excess over $48,475
$103,350 to $197,300: $17,651 + 24% of the excess over $103,350
$197,300 to $250,525: $40,199 + 32% of the excess over $197,300
$250,525 to $626,350: $57,231 + 35% of the excess over $250,525
Over $626,350: $188,769.75 + 37% of the excess over $626,350

Standard Deductions and Earned Income Tax Credit (EITC) Adjustments

In 2025, standard deductions and EITC amounts will increase:

Standard Deduction: Single filers can deduct $15,000, up $400 from the previous year. Married couples filing jointly can deduct $30,000, up $800.
Earned Income Tax Credit (EITC): The credit increases based on the number of qualifying children. For example, a single filer with no children earning $8,490 can receive up to $649, while those with three or more children can receive up to $8,046.

Additional IRS Adjustments

Alternative Minimum Tax (AMT): The exemption is raised to $88,100 for single filers and $137,000 for married couples filing jointly.
Gift Limit: The limit for tax-free gifts is increased to $19,000.
Adoption Credit: Families can claim up to $17,280 in adoption expenses.
Foreign Earned Income and Estate Tax Limits: Increased thresholds to accommodate inflation.

Social Security Adjustments

Due to a 2.5% increase in the cost of living, Social Security benefits are increasing. Here’s what’s changing:

Social Security Taxable Earnings: The maximum income subject to Social Security tax increases to $176,100.
Earnings Limits for Recipients: For individuals below full retirement age, the limit increases to $23,400. Those reaching full retirement age in 2025 have a new limit of $62,160.
Tax Rate for Social Security: The employee rate remains at 7.65%, and self-employed individuals continue to pay 15.3%.

These IRS and Social Security changes in 2025 aim to provide relief amid rising living costs. Adjustments to tax brackets, standard deductions, EITC, and Social Security benefits can mean greater financial support and stability for U.S. taxpayers.

Understanding these changes will help people plan and optimize their finances, especially those on Social Security and lower-income earners relying on tax credits.