Navigating the 2025 Tax Changes: What You Need to Know as You File in 2026

As we start 2026, it's time to prepare for filing your 2025 taxes. Thanks to annual inflation adjustments from the IRS and key enhancements from the One Big Beautiful Bill Act passed in 2025, there are several important updates that could affect your tax bill and refund. These changes apply to income earned in 2025 (returns filed in 2026) and include boosted standard deductions, new deductions for certain workers and seniors, and permanent lower rates to keep more money in your pocket.

Here's a breakdown of the biggest changes and how they might impact you when you file this year.

1. Tax Brackets and Rates Remain Stable with Inflation Adjustments

The seven federal income tax rates stay the same: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The good news? The One Big Beautiful Bill Act made these lower rates permanent, avoiding the scheduled increases that would have kicked in without it.
The IRS has adjusted the income thresholds upward for inflation. This means you can earn more before hitting a higher tax rate.
If your income stays roughly the same as in 2024, you might owe less due to these wider brackets.

2. Higher Standard Deductions

The standard deduction gets a significant boost for 2025 thanks to the new law:

• Single filers and married filing separately: $15,750
• Married filing jointly: $31,500
• Heads of households: $23,625

Additional standard deduction for those 65+: Typically around $1,650–$2,050 per qualifying taxpayer (exact amounts confirmed in IRS guidance).

These higher amounts mean more of your income is tax-free before calculations begin. Most taxpayers (about 90%) take the standard deduction, so this directly reduces taxable income for many.

3. Other Notable Updates and Permanent Provisions

• Child Tax Credit: Enhanced to $2,200 per child with inflation adjustments.
• No Tax on Tips and Overtime (Temporary): New deductions for qualified tips (up to $25,000) and certain overtime pay continue for qualifying workers through 2028.
• Senior Bonus Deduction: A new extra $6,000 deduction for those 65+ (introduced in 2025) is available, in addition to the regular additional amount.
• State and Local Tax (SALT) Deduction: The cap is raised to $40,000 (with phaseouts for higher incomes), benefiting high-tax state residents.
• Estate Tax Exemption: Increased and made more generous permanently.

Strategies to Minimize Your 2025 Tax Bill

• Adjust Withholding if Needed: Review your 2025 paychecks using the IRS Withholding Estimator tool.
• Maximize Retirement Contributions: Take advantage of any 2025 limits to shelter income.
• Consider Itemizing if Beneficial: With the higher SALT cap and other deductions, check if itemizing beats the standard deduction.
• Plan for Deductions and Credits: Gather records for tips, overtime, senior bonuses, or child credits.
• Consult a Professional: Tax situations vary. Talk to a tax advisor or use credit union resources for personalized guidance.

These 2025 updates generally provide relief by keeping rates low, deductions high, and adding new breaks. Staying informed now can help you maximize refunds or reduce what you owe when filing in 2026. 

For the latest details, visit IRS.gov or reach out to Meriwest Credit Union’s financial experts. We're here to help you navigate with confidence.