Tax Day is Wednesday, April 15, 2025. You must file your 2025 personal tax returns by this date!

Various changes are listed below. I am happy to discuss any of these with you, or any questions that you have about anything that I haven’t covered. Please call me at (812) 327-9108 or email me at cathy@cmartinaccounting.com to discuss any issues.

2025 tax brackets and federal income tax rates

Tax brackets 2025 (taxes due April 15, 2026)

Higher standard deductions in 2025

Changes in Standard Deduction for 2025

With the tax law updates from the One Big Beautiful Bill Act (OBBBA), taxpayers over age 65 now qualify for a new senior tax deduction. Seniors may be able to claim it regardless of whether they choose to itemize or claim the base standard deduction. A chart showing the possible standard deductions for seniors is below. Note the income limitations for the $6,000 deduction for seniors listed below the chart.

The deduction includes a phase-out range as shown below. If your Modified Adjusted Gross Income (MAGI) is between the phase out range, the amount of the deduction you can claim will be reduced.

• 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.

Child Tax Credit/Advance Child Tax Credit Payments

For tax year 2025, the Child Tax Credit benefits available are as follows:

• Up to $2,200 for 2025
• Each dependent child must be under age 17
• Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew).
• Not provide more than half of his or her own support for the tax year.
• Have lived with you for more than half the tax year.
• Be claimed as a dependent on your return.
• The credit is available if you earn up to $200,000 as single taxpayer or head of household (or up to $400,000 if you are a married couple filing jointly)

Note: It is important to know that the child tax credit differs from the child and dependent care credit. The federal Credit for Child and Dependent Care expenses can be helpful if you paid someone to care for your child or other qualifying dependent so that you (and your spouse if filing jointly) could work or look for work. Your federal income tax may be reduced by claiming the credit for child and dependent care expenses on your tax return.

Earned income tax credit 2025

For 2025 (taxes filed in 2026), the earned income credit ranges from $649 to $8,046, depending on your filing status and how many children you have. Below are the maximum 2025 earned income tax credit amounts, plus the most you can earn before losing the benefit altogether.

Regardless of when you file, your refund will be delayed if claiming the Earned Income tax credit. The IRS expects most EITC/Additional CTC related refunds to be available in taxpayer bank accounts or on debit cards by March 1, if they chose direct deposit and there are no other issues with their tax return.

HSA contribution limits

Every year, the Internal Revenue Service (IRS) sets the maximum that can be contributed to an HSA. For example, if your HSA contribution limit for the year is $4,300 (as it is in 2025) and your employer contributes $1,000, you can only contribute $3,300 — unless you are eligible for a catch-up contribution of $1,000. The amount you can contribute to an HSA each year is determined by whether you are enrolled in self-only or family coverage and if you are age 55 or older.

2025 HSA contribution limits

The HSA contribution limits for 2025 are $4,300 for self-only coverage and $8,550 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.

HSA eligibility

To contribute to an HSA, you must be enrolled in an HSA-eligible health plan. For 2025, this means:

• It has an annual deductible of at least $1,650 for self-only coverage and $3,300 for family coverage
• Its out-of-pocket maximum including annual deductible does not exceed $8,300 for self-only coverage and $16,600 for family coverage

And to contribute to an HSA you must:

• Not be enrolled in a health plan that is not an HSA-eligible plan, nor can you have a full-purpose health care flexible spending account (FSA)
• Not be enrolled in Medicare
• Not claimed as a dependent on someone else’s tax return

HSA contribution deadline

You generally have until the tax filing deadline to contribute to an HSA. In most tax years, this is at or around April 15.

HSA contribution limits when you are not enrolled in an HSA-eligible health plan for the full year

If you are not enrolled in an HSA-eligible health plan for the full year, you may only be able to contribute a portion of the allowable amount. Although, if you are covered on December 1 of a given year, you may be able to contribute the maximum amount allowed.

You can calculate your prorated contribution amount by counting the number of months you were enrolled in an HSA-eligible health plan on the first of a month and dividing it by 12. Then multiply the number by the total amount you could contribute if you were eligible the whole year.

Key Home Energy Credits & Deadlines

The “One Big Beautiful Bill Act” signed into law on July 4, 2025, has significantly accelerated the expiration of most federal home energy credits. Homeowners can still claim the Energy Efficient Home Improvement Credit (25C) and the Residential Clean Energy Credit (25D), but only for qualifying property that is installed and placed in service by December 31, 2025.   Here are the main home energy credits available for a limited time under the new law:

Energy Efficient Home Improvement Credit (Section 25C) 

This credit covers a variety of general home upgrades. 

• Credit Amount: Up to $3,200 annually in total.
• Credit Details:
  - 30% of costs for qualifying improvements.
  - $1,200 annual limit for most improvements (e.g., windows, doors, insulation, electric panels, and certain HVAC systems).
  - $2,000 separate annual limit for specific high-efficiency heat pumps, biomass stoves, or boilers.
• Deadline: Property must be placed in service by December 31, 2025. 

Residential Clean Energy Credit (Section 25D)

This credit targets major renewable energy installations. 

• Credit Amount: 30% of the total cost, with no dollar limit.
• Qualifying Systems: - Solar panels (photovoltaic systems)
  - Solar water heaters (subject to certain rules)
  - Home battery storage technology (3 kWh minimum capacity)
  - Geothermal heat pumps
  - Small wind turbines
• Deadline: All expenditures must be made (meaning the system is fully operational) by December 31, 2025.

Other miscellaneous updates for tax year 2025

• For tax year 2025, the foreign earned income exclusion is $130,000, increased from $126,500 for tax year 2024.
• Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000. 
• The annual exclusion for gifts increases to $19,000 for calendar year 2025, increased from $18,000 for calendar year 2024.
• The maximum credit allowed for adoptions for tax year 2025 is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for 2024. For 2025, up to $5,000 of the credit is refundable.