The Ultimate Guide to 2025 Tax Season

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As you start preparing documents to file your taxes, you must be up to date on the latest information. Navigating the 2025 tax season begins with considering the new adjustments in tax brackets and how they can affect you.

While tax returns aren’t due until the middle of April, the Internal Revenue Service (IRS) will accept submissions starting January 27. By taking a proactive approach and being informed and diligent in the 2025 tax season, you can optimize your financial outcomes and stay compliant with tax laws. Use this guide to find important information and confidently prepare for the new tax season.

Overview of the 2025 Tax Season

It is essential to note the difference between tax year and tax season. The tax year is when you earn income, making you responsible for paying income taxes. For most individuals, the tax year aligns with the calendar year, from January 1 to December 31. Businesses may adopt a fiscal year that ends on a date other than December 31. The income you earn during that tax year is reported on your tax return for that specific year. For example, for the tax year 2024, you would report income earned from January 1, 2024, to December 31, 2024.

Tax season is the time to file your taxes for the last tax income year. It generally runs from January 1 until the tax deadline, which is April 15. During this period, you must gather the necessary documents, prepare your tax returns and submit them to the IRS. You may file an extension during the tax season, allowing you to submit your returns later, but you must pay any taxes owed by the original deadline to avoid penalties.

Income Tax Brackets

A tax bracket is the income range taxed at a specific rate in a progressive tax system, such as the federal income tax system. Higher income levels are taxed at higher rates or percentages, meaning the more you earn, the higher taxes you’ll likely pay. Each segment or bracket has its tax rate.

It’s also important to understand the marginal tax rate, which is the rate applied to the last dollar of income earned. For example, if your income falls into a specific bracket, only the income within that bracket is taxed at the higher rate. Income in lower brackets is taxed at their respective lower rates.

The 2024 Tax Brackets

The 2024 tax brackets relate to income earned during the 2024 tax year. Taxpayers report this tax on the tax returns filed in the 2025 tax season. Below is the breakdown:

MARGINAL TAX RATESSINGLE TAX BRACKETMARRIED FILING JOINTLYHEAD OF HOUSEHOLDMARRIED FILING SEPARATELY
10%$0–$11,600$0–$23,200$0–$16,500$0–$11,600
12%$11,601-$47,150$23,201-$94,300$16,551-$63,100$11,601-$47,150
22%$47,151-$100,525$94,301-$201,050$63,101-$100,500$47,151-$100,525
24%$100,526-$191,950$201,051-$383,900$100,501-$191,950$100,526-$191,950
32%$191,951-$243,725$383,901-$487,450$191,951-$243,700$191,951-$243,725
35%$243,726-$609,350$487,451-$731,200$250,501-$626,350$243,701-$609,350
37%Over $609,350Over $731,200Over $609,350Over $365,600

 

The 2025 Tax Brackets

Use the 2025 income tax brackets to report your income for the 2025 tax year and file in the 2026 tax season:

2025 tax brackets info
MARGINAL TAX RATESSINGLE TAX BRACKETMARRIED FILING JOINTLYHEAD OF HOUSEHOLDMARRIED FILING SEPARATELY
10%$0–$11,925$0–$23,850$0–$17,000$0–$11,925
12%$11,926-$48,475$23,851-$96,950$17,001-$64,850$11,926-$48,475
22%$48,476-$103,350$96,951-$206,700$64,851-$103,350$48,476-$103,350
24%$103,351-$197,300$206,701-$394,600$103,351-$197,300$103,351-$197,300
32%$197,301-$250,525$394,601-$501,050$197,301-$250,500$197,301-$250,525
35%$250,526-$626,350$501,051-$751,600$250,501-$626,350$250,526-$375,800
37%Over $626,350Over $751,600Over $626,350Over $375,800

Deductions and Credits

Tax deductions can help to lower your taxable income, while tax credits are the dollars subtracted from your tax bill. If your credit is more than the amount of tax you owe and is refundable, you will receive a refund. Nonrefundable credits will only reduce your tax liability to zero. Potential deductions and credits you need to consider include:

1. Charitable Deductions

A charitable contribution is a gift or donation to a qualified organization. Qualified organizations generally include nonprofit groups established for educational, religious, literary or scientific purposes. Taxpayers may deduct up to 100% of their charitable donations up to a maximum of 60% of their adjusted gross income (AGI) for the tax year. However, sometimes, 20%, 30% or 50% limits apply.

2. Business Credits and Deductions

A tax credit is the amount subtracted from the taxes owed, whereas a tax deduction is an amount deducted from the income to reduce the tax liability. Businesses may claim several credits, including the following:

  • Employer-provided child care credit: Businesses may claim credit for providing child care to employees.
  • Energy-efficient home construction credit: Eligible contractors who build qualified energy-efficient homes may claim tax credits.
  • Clean vehicle credit: Buying a new electric or fuel cell vehicle for business use may qualify a business for a tax credit.
  • Fuel tax credit: Businesses may get refundable credits for fuel used in specific work-related activities.
  • Research credit: Businesses may claim tax credits for qualified research expenses.

In addition to the tax credits, businesses can deduct expenses to reduce their taxable income. However, certain taxpayers, such as cannabis businesses, cannot deduct ordinary business expenses for purposes of federal income taxes. They can only deduct expenses for costs of goods sold (COGS).

3. Medical Deductions

Individuals may deduct medical and dental expenses incurred for themselves, their spouses and their dependents as long as the expense exceeds 7.5% of their AGI for the year. This deduction applies to those not compensated by insurance or otherwise. It does not matter whether you directly receive the reimbursement or payment is made on your behalf to the hospital or medical professionals.

4. Earned Income Tax Credit (EITC)

Taxpayers with earned income who meet certain AGI and credit limits for the previous, current and upcoming tax years may claim the EITC. Earned income includes wages and taxable income earned from working for someone else, a business or yourself. For the tax year 2024, the maximum AGI and credit amounts are as follows:

Children or Relatives ClaimedFiling As Married Filing JointlyFiling as Single, Married Filing Seperately, Head of Household or WidowedMaximum Credit Amounts Based on Number of Qualifying Children
Zero$25,511$18,591$632
One$56,004$49,084$4,213
Two$62,688$55,768$6,960
Three$66,819$59,899$7,830

The investment income limit is $11,600 or less.

5. Education Credit

education credit from the AOTC for 2025

The American Opportunity Tax Credit (AOTC) provides eligible students or their parents with credit for qualified education expenses spent on the initial four years of higher education. The credit covers the first $2,000 of qualified expenses at 100% and the next $2,000 at 25%. Each eligible student has a maximum annual credit of $2,500, but if the credit brings the tax balance to zero, 40% of the remaining credit may be refunded to the taxpayer, up to a maximum of $1,000.

6. Child Tax Credit (CTC)

The CTC applies to families who have qualifying children with Social Security numbers that are valid for employment in the United States. To qualify, the dependent child must meet specific criteria, including the following:

  1. Be 16 years old or less at the end of the tax year.
  2. Be the taxpayer’s child, stepchild or eligible foster child, although close relatives like sisters and brothers may also qualify.
  3. Be claimed on the taxpayer’s tax return as a dependant.
  4. Be a citizen, national or resident alien of the U.S.

Married couples filing jointly have an income limit of $400,000 and $200,000 for separate filing. Taxpayers with higher incomes may be eligible for a partial credit.

7. Child and Dependent Care Credit

This credit lets taxpayers offset some caregiving, daycare and babysitter costs for their dependents. To qualify, the care must enable you and your spouse, if filing jointly, to work or actively look for work. Also, you or your spouse, if filing jointly, must have lived in the U.S. for more than half the year. Special rules apply to military personnel stationed outside the country.

Important Tax Changes to Note in 2025

Staying updated on tax amendments is vital, whether you are filing as an individual or a business. The new tax rules can shape your financial strategies, influence your decision-making processes and impact your personal finances or corporate structures. Here are a few things to consider:

1. Higher Standard Deductions

The standard deduction has increased to $14,600 for tax year 2024 for single filers and married people filing separately. For married people filing jointly, it has risen to $29,200. The standard deduction for heads of households is $21,900.

2. Alternative Minimum Tax (AMT) Exemption Increase

The AMT tax system helps to ensure that high-income taxpayers pay a minimum tax amount. High earners may need to use AMT rather than standard rules to calculate their tax obligation. For taxes due in 2024, the exemptions and phase-out amounts increased to:

 Single filersMarried Filing JointlyMarried Filing Separately
Exemption Amount$85,700$133,300$66,650
Exemption Phase-out Amount$609,350$1,218,700$609,350

3. Deductions for 401(k), 403(b) and IRA Contributions

401(k) and 403(b) contributions are not tax-deductible when filing. Because these contributions are made with pre-tax dollars, they’re already excluded from a taxpayer’s taxable income and don’t qualify for additional deductions.

Roth IRA contributions are not tax-deductible. Contributions to a traditional IRA may be tax-deductible. If you or your spouse are part of an employer-sponsored plan, your IRA deductions may be reduced based on your income:

  • Single: If your income is under $77,000, you get a full deduction. You can partially deduct incomes between $77,00 and $87,000. If you make over $87,000, the deduction phases out entirely.
  • Married and filing jointly: You get a full deduction for an income under $123,000. The deduction is partial for incomes between $123,000 and $143,000. Any income over $143,000 will not benefit from the deduction.
  • Married but filing separately: If you are married but filing separately, you cannot get a full deduction. You can get a partial deduction if you make less than $10,000. Anything over that amount will not receive the deduction.

Other Notable Mentions

In addition to the significant tax changes, there are several others to keep in mind. Here are some examples:

  • Annual gifts exclusion: Single filers can gift $18,000 without paying a gift tax. The IRS states that married couples do not need to file a joint gift tax return.
  • Transportation fringe benefit: The monthly limitation for qualified transportation fringe benefits is $315. Employers offer this tax-free benefit.
  • Foreign-earned income exclusion: Foreign-earned income exclusion also increased in the 2024 tax year. U.S. citizens who work outside the country can exclude $126,500 from their income earned in foreign countries.
  • Unemployment benefits: Taxpayers with non-wage income, like unemployment benefits, may need to make estimated or additional tax payments for the last quarter in January 2025.
  • 1099-K reporting changes: If you received above $5,000 in goods and services through a payment app or online marketplace in 2024, you should expect to receive a Form 1099-K in January 2025. 

Guide to Filing Taxes in 2025

Remember, the deadline for filing your federal tax returns and making tax payments is April 15, 2025. If you request an extension, the last day to file taxes is October 15, 2025. Follow these steps to file your taxes accurately and smoothly:

how to file taxes in 2025
  • Collect your documents: You should get your W-2 from your employer by the end of January. Freelancers’ clients will each send a 1099 form. Additional tax forms you need include investment income statements, receipts for deductions, mortgage interest statements and charitable contribution statements.
  • Filing method: You can file your taxes by using tax software or enlisting a tax professional. Ensure you use the correct forms, like 1040 for individual income tax. You can also submit your tax return via e-filing, which often facilitates faster processing and refunds.
  • Review credits and deductions: You can lower your tax liability through eligible credits and deductions.
  • Check your withholding: Use the IRS withholding estimator to check if your withholding needs any adjustment. These changes will reflect on your W-4 and can help to avoid unwanted tax surprises.
  • Provide accurate information: Always double-check the information you provide the IRS. Mistakes in personal information, deductions and income details can lead to delays and tax return issues.
  • Pay your taxes: Various tax payment methods are available to help you pay owed tax promptly. Paying promptly helps you avoid interest or penalties for late payment.
  • Keep records: Keep copies of your supporting documents, receipts and filed tax returns. These are helpful for potential disputes or future audits — the IRS recommends you keep documents for three to seven years.

Forms Needed to Complete Your Return

You might need to gather a few forms come tax season. From your W-2 to various 1099s, you’ll likely have much to keep track of. Depending on your financial circumstances and activities, these forms and some additional ones may apply. While not all of these forms apply to every tax filer, common tax forms you might need include:

  • W-2: Your employer sends you this form, which reflects your earned wages.
  • 1099-B: If you sold any stock in the last tax year, your broker will send you this form.
  • 1099-DIV or 1099-INT: If you received dividends or earned any interest income over $10, your investment manager sends you this form.
  • 1099-G: You’ll get this form if you received unemployment benefits.
  • 1099-K: This form reports income earned from credit card payments, prepaid cards, debit cards or from a third-party processor. These sources include Venmo, PayPal or CashApp if the payments exceed a specified amount and transactions.
  • 1099-MISC: This form reports rental or miscellaneous income, excluding self-employment.
  • 1099-NEC: If you were self-employed or received other nonemployee compensation, you can expect to receive this form from whoever compensated you.
  • 1099-R: If you received distributions from an IRA or other retirement plan, your account administrator will send this form.
  • 1099-SA: This form reports distributions from your health savings account.

Understanding Your Refund

In straightforward cases, after processing your tax return, the IRS will issue your refund within 21 days. To avoid delays, ensure that your documents are accurate and transparent. Provide the correct personal information, deductions you want to claim and precise income reports.

To speed up your refund process, you can opt for e-filing or direct deposit to speed up your refund process. In-person filing and receiving your check by mail might cause additional delays. You can also monitor your refund status on the IRS website or mobile app.

How a Tax Professional Can Help

Using a tax professional to help you file your taxes can give you peace of mind with comprehensive guidance. They can help ensure you adhere to tax laws and use all the relevant tax credits. A tax professional can also be beneficial in several other ways:

  • Planning and compliance: With their unique insight, tax professionals offer strategic planning advice to ensure compliance. This planning is beneficial because of complex tax laws, changes, and regulations.
  • Complex tax matters: Tax attorneys can advise business owners, high-net-worth individuals, and anyone facing tax-related legal challenges.
  • Legal counsel: A tax attorney offers legal counsel on interpreting tax laws and mitigating penalties or potential risks in various tax matters.
  • Audit representation: If the IRS audits you or you have a dispute, your tax attorney can represent you and offer assistance in appeals and negotiations.
  • Advice and strategy: With their help, you can get a tailored tax strategy to identify credits or deductions, minimize liabilities, and optimize your financial planning for the new tax year.

Tax professionals can provide valuable services in other instances as well. These include:

  • Starting or running a business: Consider getting a tax attorney if you started or ran a business in the last tax year. The federal income tax system can be complex, and a professional can help you stay compliant and avoid unnecessary penalties.
  • Nonprofits: Tax attorneys can help nonprofit organizations obtain section 501(c)(3) status, which gives organizations like private schools, foundations, churches and charities tax exemptions.
  • Tax fraud investigations and failure to pay taxes: If you are under investigation, hire a tax attorney to help you settle your tax balance and negotiate payment options.
  • Probate matters and estate tax returns: Tax attorneys can help with navigating probate matters, resolving estate disputes and asset distribution. They can also assist in filing estate tax returns while staying tax-compliant.

Why Trust Us?

At Polston Tax, we understand that navigating the complexities of the tax system can be overwhelming. Our knowledgeable tax professionals are dedicated to helping you make informed decisions.

With years of experience, we stay on top of the latest tax laws and changes that could impact you. We can guide you on the critical deadlines and potential deductions and credits. We simplify complicated tax concepts, making them easy to understand.

We believe in transparency, integrity, and putting our clients first. We aim to empower you with the knowledge you need to navigate tax season confidently. Trust Polston Tax to be your reliable partner, guiding you every step of the way and ensuring you maximize your tax benefits. Let us help you achieve peace of mind this tax season!

Polston Tax Can Help You in the 2025 Tax Season

Educate yourself about essential tax changes that may impact your filing before the 2025 tax season begins. You can streamline your tax filing process by organizing your financial documents, seeking professional guidance, and using the deductions and credits available.

If you need help filing your tax return or owe back taxes from unfiled returns or previous taxes, we can help. Since 2001, Polston Tax has offered small business tax accounting and resolution services. Contact us today for a free consultation or assistance with your 2025 tax season queries, or call us at 844-841-9857 for more information!

Linked sources:

  1. https://www.irs.gov/newsroom/irs-announces-jan-27-start-to-2025-tax-filing-season-agency-continues-historic-improvements-to-expand-enhance-tools-and-filing-options-to-help-taxpayers 
  2. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024
  3. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025
  4. https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
  5. https://www.irs.gov/credits-deductions/businesses 
  6. https://polstontax.com/blog/your-complete-guide-to-understanding-cannabis-tax/
  7. ttps://www.irs.gov/taxtopics/tc502
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  9. https://www.irs.gov/credits-deductions/individuals/aotc
  10. https://www.irs.gov/credits-deductions/individuals/child-tax-credit
  11. https://www.irs.gov/credits-deductions/individuals/child-and-dependent-care-credit-information
  12. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024 
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  14. https://www.irs.gov/retirement-plans/ira-deduction-limits
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  16. https://www.irs.gov/newsroom/2024-tax-filing-season-set-for-january-29-irs-continues-to-make-improvements-to-help-taxpayers 
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  20. https://www.irs.gov/forms-pubs/about-form-1040
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  22. https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records#:~:text=Keep%20records%20for%203%20years%20from%20the%20date%20you%20filed,securities%20or%20bad%20debt%20deduction. 
  23. https://polstontax.com/blog/what-happens-if-you-get-audited-by-the-irs/ 
  24. https://polstontax.com/blog/why-your-small-business-needs-a-tax-attorney/
  25. https://polstontax.com/contact-us/
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