The 2025 tax season is officially upon us, and as millions of Americans prepare to file their taxes, there are significant updates and adjustments to keep in mind. The Internal Revenue Service (IRS) has begun accepting tax returns as of January 27, 2025, setting the stage for another year of financial reckoning for taxpayers nationwide.
This year, the IRS has announced changes to federal income tax brackets, which have increased by about 2.8%. This adjustment, much lower than the 5.4% increase observed for the 2024 tax year, reflects the cooling inflation trends observed over the past year. According to Brian Long, senior tax advisor at Wealth Enhancement Group, "When all the tax brackets go up, but your salary stays the same, relatively, that's lower... even if you make more, you could actually pay less in tax" due to these adjustments.
Coupled with the changes to tax brackets are notable increases to the standard deduction for 2025. Married couples filing jointly will now benefit from a standard deduction raised to $30,000, up from $29,200, whereas single filers can now claim $15,000, increasing from $14,600. This means individuals should review their tax situation carefully, as these changes could lead to reduced taxable income for many. Tactical awareness around these changes is important, especially as Sheneya Wilson from Fola Financial notes, "It ends up nearly balancing out"—suggesting many will feel the effects of inflation alongside these tax adjustments.
One significant aspect of the current tax season is the implementation of various tools and options available to streamline the filing process. The IRS Free File is available for low-to-middle-income taxpayers, providing guided software for individuals earning less than $84,000 annually. This initiative is joined by Direct File options present in 25 states, allowing taxpayers to file directly with the IRS without needing costly third-party services. Taxpayers should also be mindful of other assistance programs such as the Volunteer Income Tax Assistance (VITA), which offers free tax help primarily for individuals earning $67,000 or less.
For those already pondering where their tax refunds are, the IRS offers the effective tool “Where’s My Refund?” This online feature informs taxpayers of their refund status, whether it has been received, approved, or sent. Tracking your refund is just one step toward making sure your finances stay orderly this tax season. Taxpayers are advised to check their refunds 24 hours post-e-filing, or four weeks for paper filings.
Despite these positive changes, uncertainties loom around the IRS under the new presidential administration. Recent initiatives have resulted in the new U.S. Treasury Secretary, Scott Bessent, taking on leadership roles—his focus being on upcoming tax policy, expiration of specific Tax Cuts and Jobs Act provisions, and potential IRS reforms. Bessent’s choices will likely have considerable influence moving forward.
To wrap it all up, tax season 2025 offers ample opportunities for individuals to maximize their financial outcomes with the available credits, deductions, and support measures available. Notably, tax credits such as the Child Tax Credit (CTC) were reaffirmed this season, providing families with financial relief; the CTC's refundable aspect has risen from $1,600 to $1,700, offering greater benefits to eligible families.
Lastly, being organized is key to efficiently managing your taxes this season. Taxpayers are encouraged to digitize their paperwork, unearthing W-2 forms and receipts for expenses to avoid misplaced documentation. Navigational stability can also be provided by maintaining thorough records of income streams and substantial expenses, and seeking professional advice when necessary.
With the right preparation, knowledge, and tools at one's disposal, taxpayers can successfully navigate the intricacies of this tax season, utilizing all available resources to optimize their returns and diminish their tax burden.