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According to Lagradaonline, As the new year approaches, the federal government has announced significant updates regarding Social Security and tax regulations. The Social Security Administration (SSA) has released its long-awaited Cost-of-Living Adjustment (COLA), while the Internal Revenue Service (IRS) has updated its tax brackets and related changes for 2025.
IRS Changes to Tax Income Brackets
The IRS has made adjustments to the income tax brackets for the upcoming year, although some rates remain unchanged. The top tax rate of 37% will still apply to:
- Single filers earning over $626,350
- Married couples filing jointly with incomes exceeding $751,600
Here are the updated tax brackets reflecting changes in taxable income ranges:
For Married Couples Filing Jointly and Surviving Spouses
| Taxable Income Range | Tax Calculation |
|---|---|
| Under $23,850 | 10% |
| $23,850 to $96,950 | $2,385 plus 12% of the excess over $23,850 |
| $96,950 to $206,700 | $11,157 plus 22% of the excess over $96,950 |
| $206,700 to $394,600 | $35,302 plus 24% of the excess over $206,700 |
| $394,600 to $501,050 | $80,398 plus 32% of the excess over $394,600 |
| $501,050 to $751,600 | $114,462 plus 35% of the excess over $501,050 |
| Over $751,600 | $202,154.50 plus 37% of the excess over $751,600 |
For Unmarried Individuals
| Taxable Income Range | Tax Calculation |
|---|---|
| Under $11,925 | 10% |
| $11,925 to $48,475 | $1,192.50 plus 12% of the excess over $11,925 |
| $48,475 to $103,350 | $5,578.50 plus 22% of the excess over $48,475 |
| $103,350 to $197,300 | $17,651 plus 24% of the excess over $103,350 |
| $197,300 to $250,525 | $40,199 plus 32% of the excess over $197,300 |
| $250,525 to $626,350 | $57,231 plus 35% of the excess over $250,525 |
| Over $626,350 | $188,769.75 plus 37% of the excess over $626,350 |
Example Calculation
Using New York’s median household income of $81,386 in 2022, a couple filing jointly could expect to owe approximately $9,289 in federal taxes. This calculation considers different rates applied to various portions of their taxable income, factoring in possible deductions.
Also read: $10,000 Checks Await: Americans Must Act Quickly to Claim Their Share of $8M Settlement
Standard Deductions for 2025
For tax year 2025, the standard deductions will also see increases:
- Single filers: The standard deduction rises to $15,000, up $400 from the previous year.
- Married couples filing jointly: The deduction increases by $800, reaching $30,000.
Updates to the Earned Income Tax Credit (EITC)
The IRS will adjust the Earned Income Tax Credit as follows:
| No Qualifying Children | 1 Qualifying Child | 2 Qualifying Children | 3+ Qualifying Children | |
|---|---|---|---|---|
| Earned Income | $8,490 | $12,730 | $17,880 | $17,880 |
| Maximum Credit | $649 | $4,328 | $7,152 | $8,046 |
| Threshold Phaseout (Married Filing Jointly) | $17,730 | $30,470 | $30,470 | $30,470 |
| Completed Phaseout (Married Filing Jointly) | $26,214 | $57,554 | $64,430 | $68,675 |
| Threshold Phaseout (Other Filers) | $10,620 | $23,350 | $23,350 | $23,350 |
| Completed Phaseout (Other Filers) | $19,104 | $50,434 | $57,310 | $61,555 |
Alternative Minimum Tax (AMT) Exemptions
The AMT exemptions will also increase in 2025:
- Single filers: Exemption rises to $88,100.
- Married couples filing jointly: Exemption increases to $137,000. Phase-outs begin at $626,350 and $1,252,700, respectively.
Other Tax Changes
- Annual gift exclusion: Increases to $19,000.
- Adoption credits: Top out at $17,280.
- Foreign-earned income exclusion: Set at $130,000.
- Estate tax exclusion: Increases to $13,990,000.
Changes to Social Security
The 2.5% Cost-of-Living Adjustment (COLA) announced in October will affect various benefits, including Social Security, Supplemental Security Income (SSI), and disability payments. Key changes include:
- The maximum taxable earnings for Social Security will increase by $7,500, reaching $176,100.
- The earnings limit for workers under full retirement age will rise to $23,400.
- For individuals reaching full retirement age in 2025, the limit increases from $59,520 to $62,160.
It’s important to note that the Social Security payroll deduction tax will remain at 7.65% for employees and 15.3% for self-employed individuals.
Conclusion
These updates from the IRS and Social Security Administration are vital for taxpayers and beneficiaries. Understanding these changes can help individuals and families better prepare for the financial adjustments in the upcoming year.
