Editor’s note: Order your personalized 2025 Key Financial Data card here.
With a Republican sweep in the 2024 elections, it has become increasingly likely that new tax legislation is on the horizon. This is a continuation of what we have come to expect since 2017 and the passing of no less than seven subsequent pieces of tax legislation. With each new piece of legislation comes more nuances, more expiring tax breaks, more inflation adjustments, and more rules to follow than ever before.
Stay on top of the details with our annual compilation of the various tax rates, thresholds, limitations and exemptions for the new year.
Eight years ago, the Republican-led Congress approved the most far-reaching tax legislation since 1986. The Tax Cuts and Jobs Act of 2017 (TCJA), passed without broad consensus as a result of the “reconciliation process,” managed to turn 100 years of tax law on its head.
Not to be outdone, in late 2019 Congress passed the SECURE Act, drastically changing the rules around the inheritance of retirement accounts by non-spouse beneficiaries. Then in 2021, we ushered in a new president and a new set of proposed tax changes under the Biden Administration. In 2021, the American Rescue Plan was passed, followed by the Inflation Reduction Act and SECURE Act 2.0 in 2022.
As a result, we have seen several major pieces of tax legislation passed within the last eight years, and with each piece of legislation, we have more nuances, more inflation adjustments, more expiring tax breaks, and more rules to follow.
Taxpayers will need to be mindful, too, since many of the numerous provisions from the TCJA that were expected to sunset at the end of 2025 may in fact be extended with President Trump being elected for a second term and Republicans winning a majority in both houses of Congress. Even still, some provisions were made permanent, meaning that taxpayers should be ever aware of their tax situation (and plan around it), to ensure they are prepared regardless of what new legislation is passed in 2025 and beyond.
Considering our current legislation, the Internal Revenue Service (IRS) announced inflation adjustments for tax year 2025, and these are more impactful now than ever before. While this year’s adjustments are not the historic increases we have seen in recent years, they will change individual income tax brackets and increase some key tax deductions and credits for tax year 2025.
Your clients can shield more money from taxes in 2025, thanks to these inflation adjustments. Automatic annual adjustments mean higher thresholds for income tax brackets and an increased standard deduction. Needless to say, with all of these changes and more to come, understanding taxes matters now more than ever.
Tax brackets, tax rates and standard deductions
Tax brackets and tax rates are receiving a considerable increase in 2025. On a yearly basis, the IRS adjusts more than 60 tax provisions for inflation to prevent what is called “bracket creep.” Bracket creep occurs when people are pushed into higher income tax brackets or have reduced value from credits and deductions due to inflation, rather than through any increase in real income.
There are still seven federal income tax rates, which were set by the 2017 Tax Cut and Job Act: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The IRS increased its tax brackets by about 2.8% for each type of tax filer for 2025, such as those filing separately or as married couples. The 2025 bracket increases come after the IRS expanded its tax brackets by a historically large 7% in 2023, and about 5.4% in 2024, reflecting the high inflation in those respective years.
For 2025, more income could fall into lower tax brackets because of inflation adjustments. For instance, in the 2024 tax year single tax filers will pay 10% on their first $11,600 of taxable income. In 2025, the first $11,925 of taxable income will fall into the 10% tax bracket, which means $325 of additional income will be taxed at 10%, instead of 12% in the current tax year.
While the increase is lower than prior years, this is still a meaningful change from 2024 to 2025, where more funds can be passed through the lower tax brackets. As the year unfolds, and new potential legislation is introduced, it will be important to consider what planning can be done in 2025 to take advantage of lower rates and expanded brackets.
For 2025, the standard deduction will increase $400 for single filers, and $800 for joint filers compared with the previous year.
Table 1 shows how the brackets break out by filing status, and the trust and estates schedule is shown at the end of the table.
| Table 1: 2025 Tax Rate Schedule |
| Taxable income ($) |
Base amount of tax ($) |
Plus |
Marginal tax rate |
Of the amount over ($) |
| Single |
| 0 to 11,925 |
|
+ |
10.0 |
|
| 11,926 to 48,475 |
1,192.00 |
+ |
12.0 |
11,925.00 |
| 48,476 to 103,350 |
5,578.00 |
+ |
22.0 |
48,475.00 |
| 103,351 to 197,300 |
17,651.00 |
+ |
24.0 |
103,350.00 |
| 197,301 to 250,525 |
40,199.00 |
+ |
32.0 |
197,300.00 |
| 250,526 to 626,350 |
57,231.00 |
+ |
35.0 |
250,525.00 |
| Over 626,350 |
188,769.75 |
+ |
37.0 |
626,350 |
| Married filing jointly and surviving spouses |
| 0 to 23,850 |
|
+ |
10.0 |
|
| 23,851 to 96,950 |
2,385.00 |
+ |
12.0 |
23,850.00 |
| 96,951 to 206,700 |
11,157.00 |
+ |
22.0 |
96,950.00 |
| 206,700 to 394,600 |
35,302.00 |
+ |
24.0 |
206,700.00 |
| 394,601 to 501,050 |
80,398.00 |
+ |
32.0 |
394,600.00 |
| 501,051 to 751,600 |
114,162.00 |
+ |
35.0 |
501,050 |
| Over 751,600 |
202,154.50 |
+ |
37.0 |
751,600.00 |
| Head of household |
| 0 to 17,000 |
|
+ |
10.0 |
|
| 17,001 to 64,850 |
1,700.00 |
+ |
12.0 |
17,000.00 |
| 64,851 to 103,350 |
7,442.00 |
+ |
22.0 |
64,850.00 |
| 103,351 to 197,300 |
15,912.00 |
+ |
24.0 |
103,350.00 |
| 197,301 to 250,500 |
38,460.00 |
+ |
32.0 |
197,300.00 |
| 250,502 to 626,350 |
55,484.00 |
+ |
35.0 |
250,500.00 |
| Over 626,350 |
187,031.50 |
+ |
37.0 |
626,350.00 |
| Married filing separately |
| 0 to 11,925 |
|
+ |
10.0 |
|
| 11,926 to 48,475 |
1,192.00 |
+ |
12.0 |
11,925.00 |
| 48,476 to 103,350 |
5,578.50 |
+ |
22.0 |
48,475.00 |
| 103,351 to 197,300 |
17,651.00 |
+ |
24.0 |
103,350.00 |
| 197,301 to 250,525 |
40,199.00 |
+ |
32.0 |
197,300.00 |
| 250,526 to 375,800 |
57,231.00 |
+ |
35.0 |
250,525.00 |
| Over 375,800 |
101,077.25 |
+ |
37.0 |
375,800.00 |
| Estates and trusts |
| 0 to 3,150 |
|
+ |
10.0 |
|
| 3,151 to 11,450 |
315.00 |
+ |
24.0 |
3,150.00 |
| 11,451 to 15,650 |
2,307.00 |
+ |
35.0 |
11,450.00 |
| Over 15,650 |
3,777.00 |
+ |
37.0 |
15,650.00 |
Source: IRS
Standard deduction. The standard deduction, shown in Table 2, increases slightly from $29,200 in 2024 to $30,000 in 2025, for married-filing-jointly filers; from $14,600 to $15,000, for single and married-filing-separately filers; and from $21,900 to $22,500, for head-of-household filers.
Personal exemption. Remember that the ability to take personal exemptions has been eliminated, a change which to some degree tempers the benefit of the higher standard deduction.
| Table 2: 2025 Standard Deductions and Child Tax Credit |
| Filing status |
Standard deduction |
| Married, filing jointly and qualifying widow(er)s |
$30,000 |
| Single or married, filing separately |
$15,000 |
| Head of household |
$22,500 |
| Dependent filing own tax return |
$1,350* |
| Additional deductions for non-itemizers |
| Blind or over 65 |
Add $1,600 |
| Blind or over 65, unmarried and not a surviving spouse |
Add $2,000 |
| Child Tax Credit |
| Credit per child under 17 |
$2,000 ($1,700 refundable) |
| Income phaseouts begin at AGI of: |
$400,000 joint, $200,000 all other |
*Greater of $1,350 or $450 plus the individual’s earned income.
Source: IRS
The additional standard deduction amounts went up slightly from 2024. Thus, people who are blind or over age 65 receive an extra deduction of $1,600 each in 2025 up from $1,550 in 2024. The additional deduction also increases from $1,950 in 2024 to $2,000 in 2025 for unmarried taxpayers.
For 2025, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,350 or the sum of $450 and the individual’s earned income (not to exceed the regular standard deduction amount).
Itemized deductions
Deduction for medical expenses. Taxpayers who itemize can claim a deduction for medical expenses if those expenses exceed 7.5% of adjusted gross income. Consider decreasing taxable income and bunching medical expenses to exceed the floor.
SALT and sales tax deduction is capped. The tax law limits the total deduction for property taxes, state and local income taxes, and state and local sales taxes to $10,000 a year. This amount is not adjusted for inflation and applies to single and married filing jointly, although married taxpayers filing separately only get $5,000.
Long-term-care premiums. Taxpayers who are paying for long-term care generally can deduct a portion of their premiums as a qualified medical expense. The deductible varies based on the taxpayer’s age and is subject to the 7.5% floor for medical expenses. See Table 3 below for the specific amounts. The 2025 limits have been decreased for the first time, but the decrease is minimal.
| Table 3: 2025 Deductibility of Long-Term-Care Premiums on Qualified Policies |
| Attained age before close of tax year |
Amount of LTC premiums that qualify as medical expenses in 2025 |
| 40 or less |
$480 |
| 41 to 50 |
$900 |
| 51 to 60 |
$1,800 |
| 61 to 70 |
$4,810 |
| Over 70 |
$6,020 |
Source: IRS
Limitations on deductions. Before the Tax Cuts and Jobs Act, the Pease and PEP provisions reduced the value of itemized deductions for wealthy taxpayers. This provision could be adjusted based on new legislation introduced in 2025.
Capital gains and qualified dividends
Capital gains and dividends. Tax rates on long-term capital gains and qualified dividends generally are unchanged, at 0%, 15% and 20%, but the brackets for the rates will change. For 2025, the 15% rate applies to capital gains or dividends that push taxable income above $96,700 for joint returns and surviving spouses, $64,750 for heads of household, $48,350 for single and married-filing-separately taxpayers and $3,250 for estates and trusts.
The 20% rate applies to long-term capital gains or qualified dividends that propel taxable income past $600,050 for joint filers and surviving spouses, $566,700 for heads of household, $533,400 for single filers, $300,000 for married-filing-separately filers and $15,900 for estates and trusts.
Remember that exceptions also apply for art, collectibles and section 1250 gains (related to depreciation).
Tax on net investment income. Some high-income taxpayers owe the net investment income tax (NIIT) of 3.8%, which is levied on the lesser of net investment income or modified adjusted gross income (MAGI) over $200,000 for single or $250,000 for married filing joint (see thresholds in Table 4). These amounts are not adjusted for inflation so they remain unchanged from 2024. Net investment income includes taxable interest, ordinary dividends, capital gains and other income categories, and some expenses can be subtracted.
| Table 4: 2025 Tax Rates on Long-Term Capital Gains and Qualified Dividends |
| Taxable income |
Tax rate |
| If taxable income falls below $48,350 (single/married-filing separately), $96,700 (joint), $64,750 (head of household), $3,250 (estates) |
0% |
| If taxable income falls at or above $48,350 (single/married-filing separately), $96,700 (joint), $64,750 (head of household), $3,250 (estates) |
15% |
| If income falls at or above $533,400 (single), $300,000 (married-filing separately), $600,050 (joint), $566,700 (head of household), $15,900 (estates) |
20% |
| 3.8% tax on lesser of net investment income or excess of MAGI over |
| Married, filing jointly |
$250,000 |
| Single |
$200,000 |
| Married, filing separately |
$125,000 |
Source: IRS
Additional taxes
Alternative minimum tax. The AMT has been adjusted for inflation and will continue to affect fewer and fewer taxpayers under the TCJA. In 2025, the exemption amounts rise to $137,000 for married filing jointly taxpayers, up from $133,300 in 2024; $88,100 for single filers, up from $85,700 in 2024; and $68,500 for filers who are married filing separately, up from $66,650 in 2024. The exemption amount for estates and trusts rises to $30,700, up from $29,900 in 2024.
Kiddie tax. The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages and salary, like dividends and interest. The exemption from the kiddie tax for 2025 will be $2,700 ($2,600 in 2024). A parent will be able to elect to include a child’s income on the parent’s return for 2025 if the child’s income is more than $1,350 and less than $13,500 ($1,300 and $13,000 in 2024).
Gifting and estates
Estate tax. Estate, gift and generation-skipping transfer (GST) exclusions rise from $13,610,000 in 2024 to $13,990,000 in 2025. The top federal estate-tax rate remains 40%. The IRS has issued final regulations that there will be no “clawback” if the sunset were to occur, so you should discuss potential gifting strategies with all high-net-worth clients.
Gift tax. The value of gifts one person can give another without reporting it on a gift tax return increases to $19,000 in 2025 from $18,000 in 2024. Unlimited payments for tuition and medical expenses are permitted.
Education and other credits
Education credits and deductions. As in 2024, the law continues to allow up to $10,000 a year in 529-plan distributions to pay for qualified private-school K-12 education costs (excluding homeschooling), a provision that might encourage taxpayers to focus on 529 plans rather than Coverdells. (Previously, for a 529 distribution to be qualified, it had to be used for higher-education costs, whereas K-12 expenses have been a qualified expense for Coverdell plans.)
The law also allows rollovers from 529 plans to ABLE accounts for disabled beneficiaries until December 31, 2025. But, make sure to check with the specific state, because some states are decoupling from the federal and not treating the 529 plan withdrawal for K-12 expenses as a qualified distribution, and they will also have specific rules in connection with ABLE account rollovers.
American Opportunity Tax Credit. The same as in 2024, in 2025, taxpayers with qualified education expenses can reduce their tax bill by up to $2,500 (of which $1,000 is refundable) thanks to the AOTC, if their modified adjusted gross income doesn’t exceed $80,000 ($160,000 for married-filing-jointly filers). At that income level, the credit starts to phase out.
Lifetime Learning Credit. This nonrefundable credit is worth up to $2,000. In 2025, the Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns). The Lifetime Learning Credit offers two main advantages over the American Opportunity Tax Credit. First, the LLC can be claimed for an unlimited number of tax years while the AOTC is limited to four tax years per eligible student. Second, the student doesn’t need to be pursuing a degree, while the AOTC requires the student to be pursuing a degree or other credential.
Child tax credits and alimony
Child tax credit. The child tax credit stays at $2,000 per qualifying child in 2025, with the amount that is refundable also remaining at $1,700, subject to phaseouts. Phaseouts will begin with adjusted gross income of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers (unchanged from 2024).
Alimony. Alimony is no longer taxable to the recipient nor is it deductible for the payor after 2018 as a result of the Tax Cuts and Jobs Act. Reconsider property settlements and alimony for all divorces going forward.
Education incentives and accounts
Student loan interest deduction. The student loan interest deduction allows an above-the-line deduction of up to $2,500. The deduction starts to phase out once modified adjusted gross income reaches $85,000 ($170,000 for married-filing-jointly filers) and is unavailable to taxpayers with modified adjusted gross income higher than $100,000 ($200,000 for joint filers).
Tax-free savings bond interest. In 2025, the ability to enjoy tax-free interest from savings bonds that are redeemed to pay for higher-education costs starts to phase out for taxpayers with modified adjusted gross income of $99,500 ($149,250 for joint filers). This income limits are higher than in 2024, when income phaseouts began at $96,800 ($145,200 for joint filers).
Coverdell Education Savings Accounts. Parents and others who want to save for a student’s education costs can contribute a maximum of $2,000 to these accounts (contributions are after-tax, like a Roth IRA), and then withdraw the contributions and investment earnings tax-free if the funds are used to pay qualified education expenses. The maximum contribution stays the same in 2025 as in 2024, and starts to phase out for taxpayers with modified adjusted gross income of $95,000 ($190,000 for married-filing-jointly filers).
Business income and QBI
Schedule C and pass-through business income, aka, QBI Deduction. Don’t forget about the 20% deduction against qualified business income for pass-through entities and business owners who file a Schedule C. Phaseouts for those in a specified trade or business begin at $394,600 for married filing jointly (or $197,300 for single). These phaseouts are increased from $383,900 for married filing jointly (or $191,950 for single) in 2024.
Retirement plan rules
Retirement plan contribution limits. Retirement plans (see Table 5) continue to remain in the news and are the subject of much debate. The total amount that employers and employees combined can contribute to a 401(k) or similar defined-contribution plan rises to $70,000 in 2025, up from $69,000 in 2024. The maximum annual employee contribution increases from $23,000 in 2024 to $23,500 in 2025. The catch-up contribution for people aged 50 and older remains at $7,500 in 2025. The limit on how much compensation can be counted under a qualified plan rose to $350,000, from $340,000 in 2024. Meanwhile, the basic annual benefit limit for defined-benefit increased to $280,000 from $275,000 in 2024. As a reminder, RMDs do not start until age 73 (per SECURE Act 2.0).
“Super” catch-up contributions. Starting in 2025, individuals between the ages of 60–63 will be able to make a larger catch-up contribution of $11,250. This increased catch-up contribution is only available during the four years, after which the regular catch-up contribution of $7,500 is allowed for individuals age 64 and older.
New parent withdrawals. Following the birth or adoption of a child, a new parent (or parents) may withdraw up to $5,000 each from his or her account without incurring the usual 10% penalty on early withdrawals. Parents can make this withdrawal up to one year after the birth of the child and may put the money back into the retirement fund at a later date.
| Table 5: 2025 Retirement Plan Contribution Limits |
| Plan type |
Contribution limit |
| Annual compensation used to determine contribution for most plans |
$350,000 |
| Defined-contribution plans, basic limit |
$70,000 |
| Defined-benefit plans, basic limit |
$280,000 |
| 401(k), 403(b), 457(b), Roth 401(k) plans elective deferrals |
$23,500 |
| Catch-up provision for individuals 50–59 and 64+, 401(k), 403(b), 457(b), Roth 401(k) plans |
$7,500 |
| Catch-up provision for individuals 60–63, 401(k), 403(b), 457(b), Roth 401(k) plans |
$11,250 |
| SIMPLE plans, elective deferral limit |
$16,500 |
| SIMPLE plans, catch-up contribution for individuals 50 and over |
$3,500 |
Source: IRS
Individual Retirement Accounts. In 2024, taxpayers who save for retirement in a traditional IRA or Roth IRA are limited to a $7,000 contribution, plus a $1,000 catch-up for those 50 and older. These amounts are unchanged from 2024. However, there is no age limit on your ability to contribute to an IRA, as long as you have earned income.
Deductible IRA. Taxpayers who aren’t participating in a retirement plan at work generally can fully deduct their contributions to a traditional IRA. However, income thresholds limit the deductibility of such contributions for taxpayers who are participating in a workplace plan (or if their spouse participates). Table 6 details the income thresholds, which are slightly higher in 2025, due to IRS inflation adjustments.
| Table 6: 2025 Individual Retirement Account Contributions |
| IRA type |
Contribution limit |
Catch-up at 50+ |
Income limits |
| Traditional nondeductible |
$7,000 |
$1,000 |
None |
| Traditional deductible |
$7,000 |
$1,000 |
If covered by a plan:
$126,000–$146,000 joint
$79,000–$89,000 single, HOH
0–$10,000 married filing separately
If one spouse is covered by a plan:
$236,000–$246,000 joint
|
| Roth |
$7,000 |
$1,000 |
$236,000–$246,000 joint
$150,000–$165,000 single & HOH
0–$10,000 married filing separately
|
| Roth conversion |
|
|
No income limit |
Source: IRS
IRA contributions. As stated in Table 6, income thresholds limit who can contribute directly to a Roth IRA (there are no such income limits on Roth conversions). Consider “back-door” Roth conversions or partial conversions if your client doesn’t qualify, assuming they are still available.
Tax-free IRA distributions to charity, or qualified charitable distributions (QCDs). As in 2024, the annual QCD limit is indexed for inflation in 2025. People aged 70½ or older can make tax-free distributions of up to $108,000 from an IRA directly to a charity in 2025 (up from $105,000 in 2024). The distribution will decrease taxable income and, with limited exceptions, should be used by all those over 70½ who plan to make charitable contributions.
Health savings accounts
Health savings accounts offer the rare tax trifecta: Contributions are made pretax, enjoy tax-free investment returns, and money comes out tax-free if used for qualified medical expenses. The downside is that such accounts currently are available only to those who are enrolled in a high-deductible health plan, which can pose steep up-front costs for consumers. For 2025, the minimum annual deductible for a qualifying health plan is $1,650 for an individual plan (up from $1,600 in 2024) and $3,300 for family coverage (up from $3,200 in 2024). The maximum deductible contribution to an HSA in 2025 is $4,300 for individuals. For family coverage, the maximum deductible contribution is $8,550, and there is a $1,000 catch-up contribution available for ages 55 and older.
| Table 7: Health Savings Accounts |
| Annual limit |
Maximum deductible contribution |
Expense limits (deductibles and co-pays) |
Minimum annual deductible |
| Individuals |
$4,300 |
$8,300 |
$1,650 |
| Families |
$8,550 |
$16,600 |
$3,300 |
| Catch-up for 55 and older |
$1,000 |
|
|
Source: IRS
Medicare
As in 2024, the 2025 income brackets used to determine Medicare premium surcharges for high-income retirees will be indexed to inflation. As a result, some retirees may experience an increase in their Medicare surcharge costs next year. The standard premium amount in 2025 is $185.00, though some Part B beneficiaries pay less due to the “hold harmless” provision that protects them if Social Security benefits rise slower than Medicare premiums. The people who pay the higher figure include: those signing up for Medicare Part B for the first time, those who don’t receive Social Security benefits, those who don’t have their Part B benefits automatically deducted from their Social Security benefits, and others. Meanwhile, some higher-income beneficiaries will pay more than the standard premium, as shown in Table 9.
Remember: Medicare premiums apply to income from two years prior, and that decisions made today will have a future impact.
| Table 8: Medicare Deductibles |
| Part B deductible |
$257.00 |
| Part A (inpatient services) deductible for first 60 days of hospitalization |
$1,676.00 |
| Part A deductible for days 61–90 of hospitalization |
$419.00/day |
| Part A deductible for more than 90 days of hospitalization |
$838.00/day |
Source: IRS
| Table 9: 2025 Medicare Premiums |
| 2023 MAGI single |
2023 MAGI joint |
Part B Premium |
Part D income adjustment |
| $106,000 or less |
$212,000 or less |
$185.00 |
$0 |
| 106,001–133,000 |
212,001–266,000 |
$259.00 |
$13.70 |
| 133,001–167,000 |
266,001–334,000 |
$370.00 |
$35.30 |
| 167,001–200,000 |
334,001–400,000 |
$480.90 |
$57.00 |
| 200,001–500,000 |
400,001–750,000 |
$591.90 |
$78.60 |
| Above 500,000 |
Above 750,000 |
$628.90 |
$85.80 |
Source: IRS
Social Security
Social Security beneficiaries are set to receive a 2.5% cost-of-living adjustment to their benefits in 2025. The estimated maximum monthly benefit is $4,018 in 2025, up slightly from $3,822 in 2024. The maximum taxable wage base in 2025 is $176,100, up from 2024’s $168,600. The tax rate remains the same: 6.2% each for the employer and employee (12.4% for self-employed people).
Tax on Social Security benefits. Sometimes retirees are surprised to find their Social Security benefits are taxed. Table 10 below shows the income thresholds at which benefits start to be taxed. To figure their bill, beneficiaries must compute their “provisional” income, which is also known as “combined” income. Combined income = Income + Nontaxable interest + Half of Social Security benefits. And don’t forget the Social Security Tax torpedo where benefits are taxed at a significantly higher rate when a taxpayer reports additional income.
| Table 10: Social Security |
| Benefits |
| Estimated maximum monthly benefit if turning full retirement age (66 years and 10 months) in 2025 |
$4,018 |
| Retirement earnings exempt amounts |
$23,400 under FRA
$62,160 during year reach FRA
No limit after FRA
|
| Tax on Social Security benefits: income brackets |
| Filing status |
Provisional income* |
Amount of Social Security subject to tax |
| Married filing jointly |
Under $32,000
$32,000–$44,000
Over $44,000
|
0
up to 50%
up to 85%
|
| Single, head of household, qualifying widow(er), married filing separately and living apart from spouse |
Under $25,000
$25,000–$34,000
Over $34,000
|
0
up to 50%
up to 85%
|
| Married filing separately and living with spouse |
Over 0 |
up to 85% |
| Tax (FICA) |
| SS tax paid on income up to $176,100 |
% withheld |
Maximum tax payable |
| Employer pays |
6.2% |
$10,918.20 |
| Employee pays |
6.2% |
$10,918.20 |
| Self-employed pays |
12.4% |
$21,836.40 |
| Medicare tax |
| Employer pays |
1.45% |
varies per income |
| Employee pays |
1.45% plus 0.9% on income over $200,000 (single) or $250,000 (joint) |
varies per income |
| Self-employed pays |
2.90% plus 0.9% on income over $200,000 (single) or $250,000 (joint) |
varies per income |
*Provisional income = adjusted gross income (not incl. Social Security) + tax-exempt interest + 50% of Social Security benefit
Source: IRS
Full retirement age. The so-called “full” or “normal” retirement age for claiming unreduced Social Security benefits is 66 for people who were born from 1943 through 1954. For those born after 1954 but before 1960, full retirement age is 66 plus some number of months, depending on the birth year. In 2025, the full retirement age is set at 66 years and 10 months. For those born in 1960 or later, full retirement age is 67.
The earliest anyone can claim benefits is age 62, though claiming before one’s full retirement age leads to a permanently reduced monthly benefit amount. On the other hand, delaying benefits past one’s full retirement age can lead to higher benefits—as much as 8% a year higher up to age 70. The decision of when to claim benefits is a complex one. The best answer will vary depending on an individual’s circumstances. Note that even if someone delays Social Security benefits, he or she should sign up for Medicare at age 65 to avoid a late-enrollment penalty.
Retirement earnings test. When Social Security beneficiaries earn money from working, they risk a temporary reduction in benefits if their earnings exceed a certain amount—this only applies to people who are younger than their full retirement age. For every $2 in earnings above an income threshold, $1 is withheld from their benefits. That earnings threshold is $23,400 in 2025, up from $22,320 in 2024. In the year that the beneficiary reaches full retirement age, $1 of benefits is withheld for every $3 of earnings above $62,160 in 2025, up from $59,520 in 2024. There is no reduction in benefits after full retirement age. Once the beneficiary reaches full retirement age, the benefit is adjusted to remove the actuarial reduction for those months in which benefits were withheld.
Our tax code has evolved from a two-page form in 1913 to over 75,000 pages of complex rules that are constantly changing. Keeping up with these changes will enable you to better advise clients in this very important area. This is especially important given that new tax legislation is likely to be passed in 2025 and beyond.
And as we have in the past, Horsesmouth will be running side-by-side with you to address these tax law changes and how they impact your clients.