It’s tough to say what Congress will do next, but many automatic adjustments have already been made for the 2025 tax year. From cost-of-living updates to definition changes, here’s your indinero summary of recent tax law changes.
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Federal Income Brackets
There are no new brackets in 2025, but cost-of-living adjustments were made to taxable ranges. Payroll professionals should be aware of these updated thresholds when calculating tax withholding.
| Rate | Single | Married Filing Jointly | Head of Household |
| 10% | 0 to 11,925 | 0 to 23,850 | 0 to 17,000 |
| 12% | 11,925 to 48,475 | 23,850 to 96,950 | 17,000 to 64,850 |
| 22% | 48,475 to 103,350 | 96,950 to 206,700 | 64,850 to 103,350 |
| 24% | 103,350 to 197,300 | 206,700 394,600 | 103,350 to 197,300 |
| 32% | 197,300 to 250,525 | 394,600 501,050 | 197,300 to 250,500 |
| 35% | 250,525 to 626,350 | 501,050 to 751,600 | 250,500 to 626,350 |
| 37% | 626,350 or more | 751,600 or more | 626,350 or more |
Standard Deductions
| 2024 | 2025 | |
| Single | 14,600 | 15,000 |
| Married Filing Jointly | 29,200 | 30,000 |
| Married Filing Separately | 14,600 | 15,000 |
| Head of Household | 21,900 | 22,500 |
Social Security and Medicare
The social security wage base increased from $168,600 to $176,100. Income above this limit is not subject to social security tax; payroll systems should adjust to reflect the new cap. Other rates and limits remain unchanged:
| 2024 | 2025 | |
| Social Security Wage Base | 168,600 | 176,100 |
| Social Security Tax Rate | 12.4% | 12.4% |
| Medicare Tax Rate | 2.9% | 2.9% |
| Additional Medicare Tax on Wages Above $200,000 | 0.9% | 0.9% |
Retirement Plan Contribution Limits
Employees can now contribute more to retirement plans. Consider reviewing your offerings, shifting limits may impact employee participation and compliance.
| 2024 | 2025 | |
| 401(k) | 23,000 | 23,500 |
| SIMPLE IRA | 16,000 | 16,500 |
| SEP IRA | 25% of compensation, up to $69,000 | 25% of compensation, up to $70,000 |
| Traditional IRA | 7,000 | 7,000 |
| Roth IRA | 7,000 | 7,000 |
Additionally, the definition of a Highly Compensated Employee (HCE) increased to $160,000 from $155,000. Those earning above this figure may be unable to make a full $23,500 401(k) contribution.
Roth IRA Phaseout Ranges
Depending on your modified adjusted gross income (MAGI), individuals may make a full, partial, or no contribution to your Roth IRA.
- If you earn above these figures, you are prohibited from contributing.
- If you earn below these figures, you may make a full contribution.
- If you earn within this range, you may make a partial contribution according to a special formula.
| 2024 | 2025 | |
| Single | 146,000 – 161,000 | 150,000 – 165,000 |
| Married Filing Jointly | 230,000 – 240,000 | 236,000 – 246,000 |
| Married Filing Separately | 0 – 10,000 | 0 – 10,000 |
Health (HSA) and Flexible (FSA) Savings Account Changes
Increased contribution limits and carryover allowances make HSAs and FSAs attractive components of benefit packages. Consider promoting these tools during employee onboarding.
| 2024 | 2025 | |
| HSA Contribution Limit | ||
| Individual | 4,150 | 4,300 |
| Family | 8,300 | 8,550 |
| HSA Out of Pocket Maximum | ||
| Individual | 8,050 | 8,300 |
| Family | 16,100 | 16,600 |
| HSA Minimum Deductible | ||
| Individual | 1,600 | 1,650 |
| Family | 3,200 | 3,300 |
| FSA Contribution Limit | 3200 | 3300 |
| Carryover Allowance | 640 | 660 |
Standard Mileage Deduction Rate
You may deduct 70 cents per mile for business use of a vehicle, up from 67 cents in 2025.
Bonus Depreciation Phase Out
This provision allows business owners to deduct a significant portion of the cost of long-term-use fixed assets, such as machinery, in the year of purchase. The allowable first-year write-off for equipment purchased in 2025 is 40%, down from 60% in 2025.
Fringe Benefits
The following benefits can be provided to employees on a tax-free basis. You may offer more, but if the benefit exceeds the following amounts, the excess must be counted as taxable income to that employee.
| 2024 | 2025 | |
| Transportation Pass or Parking | 315 monthly | 325 monthly |
| High-Cost Area Travel Per Diem | 309 daily | 319 daily |
| Low-Cost Area Travel Per Diem | 214 daily | 225 daily |
Foreign Earned Income Exclusion
Qualifying individuals working from outside the United States may deduct up to $130,000 in 2025, up from $126,500.
Anticipated Changes
Currently, research and development costs must be amortized evenly over a five-year period. However, the House passed a budget resolution on April 10, 2025, including a provision allowing full and immediate R&D expense deduction. As of this writing (April 13), the resolution is pending in the Senate.
Many provisions of the 2017 Tax Cuts and Jobs Act (TCJA), including expanded standard deductions and lower personal tax rates, expire at the end of 2025. Congress will likely renew some or all of the act, but if not, be sure to plan ahead for either outcome.
Conclusion
Our team of tax and accounting experts keeps up with tax law changes so you don’t have to. Book a free consultation today. We’d be delighted to share how we can maximize your deductions, streamline operations, and free you to focus on growing your business.
