The IRS has released the 2025 inflation adjustments for income tax brackets and other important provisions within the tax code (Rev. Procedure 2024-40). The adjustments were more modest than in recent years, generally reflecting an overall slowdown in inflation from the 40-year highs in 2022.
Tax laws require the IRS to adjust the dollar amounts of dozens of tax provisions each year to account for inflation. The tax brackets were generally adjusted by an approximate 2.8% rate, down from 5% last year, and 7% in 2023.
The IRS adjusted several important thresholds for transfer tax planning, including:
- Unified lifetime estate and gift tax exemption: $13.99 million (up $380,000)
- Annual exclusion for gifts: $19,000 (up $1,000)
- Exemption for a child to whom the “kiddie tax” applies: $1,350 (up $50)
Important adjustments for individuals include:
- The alternative minimum tax exemption:
- $137,000 for joint filers or surviving spouse filers (up $3,700)
- $88,100 for unmarried individual filers, other than surviving spouses (up $2,400)
- $68,500 for married filing separate filers (up $1,850)
- $30,700 for estate and trust filers (up $800)
- The standard deduction:
- $30,000 for joint filers (up $800)
- $22,500 for heads of household (up $600)
- $15,000 for single and married filing separate filers (up $400)
- Health flexible spending account annual cap: $3,300 (up $100)
The IRS also made several adjustments related to penalties:
- Minimum failure-to-file tax return penalty:
- $525 (up $15) for failures under Section 6651(a)
- $255 (up $10) for partnership return
- $255 (up $10) for an S corporation return
- Per-return penalties for failing to file a correct information return or payee statement:
- $60 (same as last year) for a corrected return filed within 30 days
- $130 (up $10) for a corrected return filed by Aug. 1, 2026
- $340 (up $30) for full failure
- $680 (up $50) for intentional disregard
- Maximum penalties for failing to file correct information returns or payee statements:
- More than $5 million in gross receipts
- $683,000 (up $18,500) for correct returns filed within 30 days
- $2,049,000 (up $55,500) for correct returns filed by Aug. 1
- $4,098,500 (up $111,500) for full failures
- $5 million or less in gross receipts
- $239,000 (up $6,500) for correct returns filed within 30 days
- $683,000 (up $18,500) for correct returns filed by Aug. 1
- $1,366,000 (up $37,000) for full failures
- More than $5 million in gross receipts
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