The IRS has announced adjustments for 2025 that will impact deductions, credits, and thresholds. Staying on top of these changes can help maximize tax benefits for you and your employees. Here’s a roundup of the key updates:

Increased Standard Deduction for 2025

The standard deduction—helpful for those who skip itemizing—has increased for the 2025 tax year:

• Single Filers: $15,000 (up $400 from 2024).
• Married Couples Filing Jointly: $30,000 (up $800).
• Heads of Household: $22,500 (up $600).

This deduction can be a valuable benefit to employees who don’t itemize, potentially lowering their taxable income and boosting their take-home pay.

Adjusted Marginal Tax Brackets

While the top tax rate remains 37%, income thresholds have shifted, impacting where different income levels fall. Here are the adjusted brackets:

• 35% for income over $250,525 (single) or $501,050 (married).
• 32% for income over $197,300 (single) or $394,600 (married).
• 22% for income over $48,475 (single) or $96,950 (married).

Knowing where you or your employees stand within these brackets can help with planning deductions and contributions throughout the year.

Alternative Minimum Tax (AMT) Thresholds

The AMT exemption has also increased to $88,100 for individuals and $137,000 for couples, with phase-outs starting at $626,350 and $1,252,700 respectively. This is particularly relevant for high earners who may be subject to AMT.

Enhanced Earned Income Tax Credit (EITC)

The maximum EITC for families with three or more children is now $8,046 for 2025. This could be valuable information for your employees who qualify for this credit, as it can significantly boost their income at tax time.

Fringe Benefits & Health Flexible Spending Adjustments

• Qualified Transportation and Parking Benefits: Monthly limits rise to $325.
• Health Flexible Spending Arrangement (FSA): Contribution cap increases to $3,300, with a carryover limit of $660.

These changes allow dental practice owners to offer even more valuable pre-tax benefits, reducing taxable income for employees while supporting healthcare expenses.

Medical Savings Account (MSA) Limits

For 2025, minimum deductibles and out-of-pocket expenses for MSAs have increased slightly. For self-only plans, the deductible is at least $2,850, with a $5,700 out-of-pocket max. Family plans must have a minimum deductible of $5,700, with a maximum out-of-pocket of $10,500.

If you have any questions about how these changes may impact you or your specific situation, reach out to us to schedule a conversation.