2025 Tax Filing Season: Start Date and Key Enhancements

The 2025 U.S. tax filing season officially begins on Monday, January 27, 2025. The IRS continues its modernization efforts, emphasizing improved taxpayer services with several anticipated enhancements for the upcoming filing season:

• Expanded Access to Tax Account Information: Taxpayers will have greater access to their tax account information via text and voice virtual assistants.
• Enhanced IRS Individual Online Account: Features for the IRS Individual Online Account are being expanded to offer more self-service capabilities.
• Mobile-Adaptive Tax Forms: Accessibility is improving with 67 tax forms now available in mobile-adaptive formats, suitable for phones and tablets, including “save and draft” capabilities.
• Expanded Scam Alerts: The IRS is increasing efforts to educate taxpayers on common scams and fraudulent attempts to steal information.

Direct File Program Sees Major Expansion!

A significant development is the substantial expansion of the Direct File program. This allows eligible taxpayers to file their federal tax returns directly with the IRS for free.

• Availability: The program will be accessible starting January 27, 2025, in 25 states, including the 12 pilot states and 13 new ones.
• New Features & Coverage: A new chatbot will help with eligibility, and live chat support in English and Spanish will continue. The program will cover more tax situations, including the Child and Dependent Care Credit, Premium Tax Credit, Credit for the Elderly and Disabled, and Retirement Savings Contribution Credits.

Beyond Direct File, the IRS also promotes the IRS Free File program (free software through commercial providers) , the Volunteer Income Tax Assistance (VITA) program for eligible taxpayers, Tax Counseling for the Elderly (TCE), and MilTax for military members and veterans.

2025 Inflation Adjustments: Changes to Deductions and Tax Brackets

For Tax Year 2025, inflation adjustments will modify standard deduction amounts, income tax brackets, and various credit and contribution limits. This is designed to prevent “bracket creep” and can help reduce your tax burden.

1. Standard Deduction Amounts Increase

The standard deduction has increased for all filing statuses compared to 2024:

• Single: $15,000 (+$400 from 2024)
• Married Filing Jointly: $30,000 (+$800 from 2024)
• Head of Household: $22,500 (+$600 from 2024)

Additional amounts are available for taxpayers aged 65 or older or who are blind.

2. Federal Income Tax Brackets Adjusted

While the seven federal income tax rates (10% to 37%) remain unchanged, the income thresholds for each bracket have moved upward. This means more of your income is taxed at lower rates before moving to higher ones.

3. Key Tax Credits and Deduction Limits

• Earned Income Tax Credit (EITC): Maximum EITC for qualifying taxpayers with three or more children increases to $8,046.
• Child Tax Credit (CTC): Remains $2,000 per qualifying child. The refundable portion (ACTC) is stated to remain at $1,700 per child.
• Adoption Credit: Maximum credit increases to $17,280.
• Health Flexible Spending Arrangements (FSAs): Employee contribution limit rises to $3,300, with a maximum carryover of $660.
• Foreign Earned Income Exclusion: Increases to $130,000 for 2025.
• Annual Gift Tax Exclusion: The amount an individual can gift without incurring gift tax increases to $19,000.
• Estate Tax Basic Exclusion Amount: Increases to $13,990,000 per individual.

4. Retirement Savings Contribution Limits for 2025

Contribution limits for tax-advantaged retirement plans have also seen adjustments:

• 401(k), 403(b), etc.: Employee deferral limit increases to $23,500. The catch-up contribution for ages 50 and over remains $7,500. A new enhanced catch-up limit of $11,250 applies for ages 60, 61, 62, and 63.
• IRAs (Traditional and Roth): The annual contribution limit remains $7,000, unchanged from 2024. The catch-up for ages 50 and over also remains $1,000.
• SEP IRAs: Contributions are limited to the lesser of 25% of compensation or $70,000.
• SIMPLE IRAs: Maximum contribution limit increases to $16,500.

5. Social Security Wage Base and IRS Interest Rates

• Social Security Wage Base: The maximum earnings subject to Social Security tax will increase to $176,100 for 2025, up from $168,600 in 2024. This means higher earners will pay more Social Security tax.
• IRS Interest Rates: For the third quarter of 2025 (starting July 1, 2025), interest rates for underpayments and overpayments remain at 7% per year for non-corporate taxpayers. This emphasizes the importance of accurate and timely tax payments.