Navigating the New Tax Terrain: 2025 IRS Changes to Understand

Ready, set, file! Taxpayers, you have between January 27, 2025, and April 15, 2025 to submit your 2024 return. Are you ready?  

First, let’s review. A combination of IRS inflation adjustments and other rule changes could impact your return.  

Here’s the breakdown: 

1. 2024 Child Tax Credit  

   1. The federal child tax credit (CTC) allows eligible parents/caregivers to reduce their tax liability, possibly resulting in a tax refund. The CTC is based on income, filing status, and number of qualifying dependents. 

   2. For the 2024 tax year, the credit has increased from $1,600 to $1,700 per dependent. 

   3. Credit phases out for single and joint filers for incomes above $200,000 and $400,000 respectively. 

      
      

2. Third-Party Network Limits for 1099-K Reporting  

   1. The typical “$600 rule” states that individuals who paid vendors a minimum of $600 through a network such as PayPal, Venmo, Square, Cash App, and others could receive a Form 1099-K. However, a reporting shift has changed the threshold for 2024. 

   2. This year, the 1099-K threshold has dropped to $5,000 with no minimum of transactions—resulting in more consumers receiving a 1099-K. 

      
      

3. Tax Brackets  

   1. Remember: Federal income tax rates are linked to tax brackets—which are adjusted annually per inflation. The seven federal tax rates are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. 

      
      

Updated Tax Brackets: 

4. Standard Deduction  

   1. Standard deduction is a fixed dollar amount that reduces taxable income and is adjusted each year for inflation.   

   2. The deduction for married couples filing jointly rises to $29,200, which is an increase of $1,500. For single taxpayers filing separately, the deduction rises to $14,600, which is an increase of $750.  

   3. Personal exemption remains at zero, meaning that taxpayers no longer have a fixed deduction subtracted from total income.  

      
      

5. Healthcare Changes  

   1. Employees in sectors with employee-provided healthcare salaries are reduced by $3,200 to cover healthcare expenses. 

   2. Medical self-only coverage must have an annual deductible of less than $2,800 but no more than $4,150 

   3.  For family coverage, the annual deductible is at least $5,550 and no more than $8,350. 

      
      

6. Exclusions  

   1. The foreign income earned exclusion is now $126,500 for U.S. citizens living and working outside of the country. 

   2. Annual exclusion for gifts rises to $18,000, allowing taxpayers to give a certain amount without using exemptions for estate tax, which is a tax on the right to transfer property when deceased.  

   3. The credit—the amount that a taxpayer can claim on their federal income tax return—allowed for adoption is $17,000.

      
      

7. Extended Deadlines  

   1. IRS has issued many tax deadline extensions for affected areas of disaster situations. This list is ever-evolving—any updates are posted to the official list on the IRS website. 
      

   Extensions till May 1st, 2025:

   

   
   

Don’t stress, just extend. 

If you have a valid filing extension, the deadline is pushed to October 15, 2025. Ask your accountant if an extension is right for you. 

Stay up to date on all IRS changes in operation here. Our team is here to help this tax season. Call our office today to get started! 

Sources: 

Taylor, K. R. (2025, January 26). Tax Season 2025 is here: Key IRS changes to know before you file. Kiplinger.com. https://www.kiplinger.com/taxes/new-tax-season-changes-to-know?utm_term=EB82ED65-0F3E-4566-8D38-CA7F282FFFD3&lrh=33d97acf353f10fda67ba96782cbc20a921dc4d7d7d217033ac23dcfb8431017&utm_campaign=231AB69E-1652-46EB-A977-6F2C6C998083&utm_medium=email&utm_content=A4B92544-8591-4D76-B414-C65A0F7D4D9B&utm_source=SmartBrief 

IRS releases tax inflation adjustments for tax year 2025. Internal Revenue Service. (n.d.). https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025 

IRS provides tax inflation adjustments for tax year 2024. Internal Revenue Service. (n.d.-a). https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024 

Cruz-Martínez, G. (2024, August 21). Child tax credit: How much is it for 2024 and 2025?. Kiplinger.com. https://www.kiplinger.com/taxes/child-tax-credit 

Taylor, K. R. (2022, October 31). 2024 and 2025 tax brackets and federal income tax rates. Kiplinger.com. https://www.kiplinger.com/taxes/tax-brackets/602222/income-tax-brackets