What’s New for U.S. Income Tax in 2025
Preparing for the 2025 tax year starts with understanding what has changed from the previous year. The primary source for these updates is the IRS Form 1040 Instructions for Tax Year 2025, available at IRS.gov. Taxpayers will report income earned during 2025 when they file their returns in 2026, with the standard federal filing deadline of April 15, 2026. Key 2025 Tax Changes Many tax rules remain the same from year to year, but inflation adjustments, updated credits, reporting requirements, and legislative changes can affect tax preparation. Knowing these changes early can help tax preparers reduce errors, rejected returns, notices, and rework. Standard Deduction The 2025 standard deduction increased due to inflation: Single or Married Filing Separately: $15,750 Married Filing Jointly: $31,500 Head of Household: $23,625 Filing status should be confirmed early because it affects the standard deduction and many other tax thresholds. Child Tax Credit and Additional Child Tax Credit For 2025, the Child Tax Credit (CTC) is up to $2,500 per qualifying child, subject to eligibility and income limitations. The Additional Child Tax Credit (ACTC) represents the refundable portion of the credit. A key change is the Social Security number requirement. Taxpayers claiming the CTC or ACTC must meet the applicable valid SSN requirements by the return due date, including extensions. Schedule 8812 is used to calculate the ACTC. If certain credits were previously denied or reduced, Form 8862 may also be required. Clean Vehicle Credits Clean vehicle credits continue to involve Form 8936 and related schedules. The rules differ depending on whether the vehicle is new, previously owned, or used commercially. For a previously owned clean vehicle, the credit can generally be the lesser of $4,000 or 30% of the sale price, subject to eligibility requirements. Tax preparers should ask whether the taxpayer transferred the credit to the dealer at the time of purchase and verify the vehicle's acquisition date. Schedule 3 Updates Schedule 3 continues to serve as an important location for nonrefundable credits. For 2025, several credits have specific line placements, including clean energy, clean vehicle, and Premium Tax Credit amounts. When a credit appears to be missing, checking the applicable Schedule 3 line can help identify reporting or mapping issues. Self-Employed Health Insurance Self-employed taxpayers may qualify for a deduction for eligible health insurance premiums. Form 7206 is used in applicable situations to calculate the self-employed health insurance deduction, which generally flows to Schedule 1. Taxpayers should retain documentation showing eligible premiums and the connection to their business activity. Qualified Charitable Distributions Taxpayers who are at least 70½ may be able to make Qualified Charitable Distributions (QCDs) directly from an IRA to an eligible charity. For 2025, the overall QCD limit is $108,000, subject to the applicable rules. A qualifying QCD can count toward a taxpayer's required minimum distribution while generally being excluded from income. However, the same amount cannot also be claimed as a charitable deduction. Required Minimum Distributions Required Minimum Distributions (RMDs) generally begin at age 73 for applicable retirement accounts. After the first required distribution year, subsequent RMDs are generally due by December 31 each year. Taxpayers who delay their first RMD until April 1 may have two taxable RMDs in the same calendar year, potentially increasing taxable income. Early Retirement Distributions Taking money from certain retirement accounts before age 59½ may result in a 10% additional tax, unless an exception applies. Form 5329 may be needed when claiming an exception that is not properly reflected on Form 1099-R. Tax preparers should document the reason for any exception and retain supporting records. Filing Extensions Taxpayers who need additional time to file can generally use Form 4868 to request an automatic six-month filing extension. However, an extension to file is not an extension to pay. Any expected tax liability should generally be paid by April 15, 2026, to help minimize potential interest and penalties. Disaster-related IRS relief can sometimes change filing and payment deadlines, so current IRS announcements should always be checked. Final Takeaway The most effective way to prepare 2025 tax returns is to compare the prior-year rules with the current-year changes. Focus especially on filing deadlines, standard deductions, tax credits, clean vehicle rules, retirement distributions, and reporting changes. For accurate preparation, always verify the latest IRS instructions and use IRS.gov as the primary source for current federal tax requirements. A good tax-year checklist and early review of client documentation can help prevent mistakes and make the filing process much more efficient.