2025 Income Tax Changes
Colleen Havens
Some Changes for Tax Year 2025 Filing Season
Standard Deduction:
Filing Status Standard Deduction Amount Mileage Rates 2025:
Single: $15,750 Medical Miles: 21 cents per mile
Married Filing Jointly: $31,500 Charitable Miles: 14 cents per mile
Married Filing Separately: $15,750 Standard Miles: 70 cents per mile
Heads of Household: $23,625
Qualifying Surviving Spouse: $31,500
Senior Bonus Deduction: Seniors (65+) additional $6,000 standard deduction for any Filing Status other than Married Filing Separately.
- The phase-out range is $75,000-$175,000 for those filing as Single.
- The phase-out range is $150,000-$250,000 for those Married Filing Jointly.
No Tax on Tips: For tipped workers, the maximum annual deduction is $25,000.
- Income Limit: The deduction phases out for single filers with Modified Adjusted Gross Income (MAGI) over $150,000, and joint filers over $300,000.
- Eligible Tips: Cash, charged, and tip-shared tips are included, but not employer-allocated tips.
No Tax on Overtime: Individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay, generally, the “half” portion of “time-and-a-half” compensation, that’s required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.
- Maximum annual deduction is $12,500 ($25,000 for joint filers)
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)
- The deduction is available for both itemizing and non-itemizing taxpayers
Gift Tax: Present-interest gift of $19,000 in 2025.
“Present-interest” means that the person receiving the gift has an unrestricted right to use or enjoy the gift immediately. In 2025 the taxpayer could give amounts up to $19,000 to each person, gifting as many different people as he or she wants, without triggering the gift tax.
Required Minimum Distributions (RMD)
Beginning in 2023, the SECURE 2.0 Act raised the age that a taxpayer must begin taking RMDs to age 73. The required beginning date for the taxpayer’s first RMD of IRAs (including SEPs and SIMPLE IRAs) is April 1 of the year following the calendar year in which he or she reaches age 73. (If you take the distribution between January and April, this will cause a double distribution for the year.) For 401(k), profit-sharing, 403(b), or other defined contribution plan the date is generally April 1 following the later of the calendar year in which the taxpayer reaches age 73 or retires (if his or her plan allows this). For each year after the taxpayer’s required beginning date, he or she must withdraw his or her RMD by December 31.
Reduction in Excise Tax on Certain Accumulations in Qualified Retirement Plans:
The excise tax rate for distributions that are less than the required minimum distribution amount (excess accumulations) is reduced to 25% for tax years beginning in 2023 and after. The taxpayer may be subject to a reduced excise tax rate of 10% of the amount not distributed, if, during the correction window, he or she takes a distribution of the amount on which the tax is due and submits a tax return reflecting this excise tax. The “correction window” is the period of time beginning on the date on which the excise tax is imposed on the distribution shortfall and ends on the earliest of the following dates: (8)
➢ The date of mailing the deficiency notice with respect to the imposition of this tax; or
➢ The date the tax is assessed; or
➢ The last day of the second taxable year that begins after the date of the taxable year in which the excise tax is imposed.