What You Need to Know Before Filing Your 2025 Taxes (Filed in 2026)
- Jan 11
- 6 min read
Learn the 2025 federal tax brackets, the updated standard deduction, deductions you can still claim, lesser‑known strategies (like the Augusta Rule and hiring your children), IRA contribution deadlines for 2025, where the IRS is focusing audits, and how to plan for 2026. Includes effective tax rate examples for single filers at $75K–$750K.
What changed from 2024 → 2025?
In October 2024, the IRS issued its usual inflation adjustments for tax year 2025 (returns you file in 2026): bracket thresholds rose ~2.8% and the standard deduction increased to $15,000 (single/MFS), $22,500 (HOH), and $30,000 (MFJ). In mid‑2025, Congress passed the One Big Beautiful Bill Act (OBBBA/H.R. 1, P.L. 119‑21). Among other changes, OBBBA made the TCJA’s seven individual rates permanent and, for 2025, slightly increased the standard deduction amounts further to $15,750 (single/MFS), $23,625 (HOH), and $31,500 (MFJ). It also raised the Child Tax Credit to $2,200 per qualifying child and temporarily increased the SALT cap to $40,000 with a phase‑down above certain incomes, starting in 2025.
Bottom line for your 2025 filing:
Rates: Still 10%, 12%, 22%, 24%, 32%, 35%, 37%.
Standard deduction (most filers): $15,750 single/MFS, $23,625 HOH, $31,500 MFJ.
Deductions & credits you can (and cannot) take for 2025
What you can still claim
Standard deduction (see above) or itemize if your deductions exceed it. With OBBBA, many TCJA rules were continued, including the broader standard deduction.
Charitable contributions, mortgage interest (subject to TCJA limits), and medical expenses (subject to AGI floors) when you itemize. OBBBA kept the TCJA’s qualified residence interest cap on acquisition debt at $750,000.
Child Tax Credit (CTC): $2,200 per qualifying child (refundable portion $1,700 for 2025).
Earned Income Tax Credit (EITC): inflation‑adjusted maximums (e.g., $8,046 for three or more qualifying children in 2025).
Qualified Business Income (QBI) deduction, §199A): OBBBA made it permanent, with some expansions starting in 2026.
What you generally cannot claim (still suspended or eliminated)
Personal exemptions (TCJA suspension made permanent under OBBBA).
Miscellaneous itemized deductions subject to the 2% floor (TCJA suspension made permanent).
Moving expense deduction (generally only for certain active‑duty military; limited expansions start in 2026).
SALT deduction update for 2025
Starting in 2025, OBBBA raised the SALT cap to $40,000 (MFS $20,000) with a phase‑down beginning at MAGI $500,000 (MFS $250,000); the deduction cannot phase below $10,000. (It’s still only available if you itemize.)
Lesser‑known strategies to consider (use responsibly)
The “Augusta Rule” (IRC §280A(g))
You can rent your personal residence for up to 14 days per year and exclude that rental income from your federal taxable income. For small business owners, a common compliant strategy is renting your home to your entity for legitimate business meetings (board retreats, trainings), with market‑rate documentation (agenda, minutes, invoice). Overcharging or exceeding 14 total rental days can trigger audit risk.
Employing your child (income shifting)
If you operate as a sole proprietorship (or a partnership where each partner is a parent of the child), wages paid to your child under 18 for bona fide work are exempt from FICA (Social Security & Medicare) and exempt from FUTA until age 21. Wages must be reasonable and actually paid, with payroll records/W‑2. Corporate entities (S‑Corp/C‑Corp) do not get these FICA/FUTA exemptions.
Tip: Because a child’s standard deduction also applies to their earned income, modest wages can be tax‑efficient. Ensure work is legitimate, age‑appropriate, and documented (job description, timesheets, pay stubs).
Deductions you can still take in 2026 that count for your 2025 taxes
You have until April 15, 2026 (Tax Day) to make 2025 IRA contributions: up to $7,000 (under 50) or $8,000 (50+). SEP/SIMPLE deadlines differ; SEP contributions can be made by your business’s return due date (including extensions).
Where the IRS is focusing (and what raises audit risk)
Digital assets (crypto): Beginning with tax year 2025, many custodial brokers must report sales/exchanges on Form 1099‑DA sent in early 2026; cost basis will phase in later, making wallet/account‑level tracking important for investors. Mismatches with Form 8949 can trigger notices. DeFi intermediaries had certain reporting obligations nullified in 2025, but taxpayers must still report gains/losses.
High‑income individuals/large partnerships: IRS has publicly targeted more audits of high‑income filers and complex pass‑throughs. Expect data‑driven matching and more correspondence audits.
1099‑K threshold rollback: OBBBA returned the Form 1099‑K threshold to the historic $20,000 & 200 transactions (retroactive guidance issued in Oct. 2025). Fewer forms ≠ less income reporting—keep good records.
Common audit flags: underreported income (W‑2/1099 mismatch), disproportionate Schedule C deductions, repeated business losses (hobby loss risk), poor crypto records, and large charitable deductions without substantiation.
Federal tax brackets (2025) & how progressive taxation works
The U.S. federal income tax is progressive: your income is taxed in layers (each “bracket”) rather than one rate on all dollars. If part of your income falls into a higher bracket, only that slice is taxed at the higher rate—not your entire income.
2025 Single filer brackets (taxable income):10%: $0–$11,925; 12%: $11,926–$48,475; 22%: $48,476–$103,350; 24%: $103,351–$197,300; 32%: $197,301–$250,525; 35%: $250,526–$626,350; 37%: $626,351+.
Effective tax rate = total federal income tax / total gross income. It’s always lower than your top marginal rate when you take the standard deduction and/or credits.
Examples: Single filer, standard deduction only (no other credits), 2025
Using the 2025 brackets above and the $15,750 standard deduction, here are illustrative federal tax estimates and effective rates for common income levels:
$75,000 income → Taxable: $59,250 → Estimated tax: $7,949 → Effective rate ~10.60%.
$175,000 income → Taxable: $159,250 → Estimated tax: $31,067 → Effective rate ~17.75%.
$250,000 income → Taxable: $234,250 → Estimated tax: $52,023 → Effective rate ~20.81%.
$375,000 income → Taxable: $359,250 → Estimated tax: $95,285 → Effective rate ~25.41%.
$500,000 income → Taxable: $484,250 → Estimated tax: $139,035 → Effective rate ~27.81%.
$750,000 income → Taxable: $734,250 → Estimated tax: $228,693 → Effective rate ~30.49%.
Calculations are based on the IRS 2025 bracket thresholds and the OBBBA‑updated standard deduction; they exclude NIIT, SE tax, AMT, or other credits/deductions. (We ran these numbers programmatically.)
Don’t forget: State taxes & the “Jock Tax”
This article covers federal tax only. States have their own rules. If you earned money in a state (even as a nonresident), you may owe that state tax on the portion earned there. Athletes and entertainers are frequently targeted because their schedules and compensation are public, a practice nicknamed the “Jock Tax.” States apportion income using duty days or games‑played methods; some cities also impose nonresident taxes.
Tax planning for 2026: what to watch
Rates & brackets: The IRS has already published 2026 inflation‑adjusted standard deductions (e.g., $16,100 single; $32,200 MFJ) and higher bracket thresholds; lower brackets rose more than higher ones due to inflation adjustments.
QBI & other OBBBA provisions: OBBBA made TCJA individual rate structure permanent and set expansions to §199A from 2026 (phase‑in ranges). Monitor guidance as IRS updates regs.
Digital assets: Expect ongoing rollout/clarifications around 1099‑DA and basis reporting, plus wallet/account‑level basis rules—clean records matter.
1099 reporting: Under OBBBA, 1099‑K returns to $20,000 & 200 transactions and certain 1099‑MISC/NEC thresholds rise beginning in 2026; ensure your vendors and platforms are capturing accurate data.
Here is a 2026 Tax Reference Card from Ameritas that shows 2026 Tax Brackets and Common Tax deductions and limitations
Best practice: Meet with a tax specialist quarterly to manage withholding/estimates, entity choices, and deductions, and to adapt to changing rules.
Who should you hire?
The IRS recognizes three categories with unlimited practice rights before the IRS: Enrolled Agents (EAs), CPAs, and attorneys. Of these, EAs are the only federally licensed tax practitioners by the IRS and the IRS calls EA status its highest credential—EAs specialize exclusively in taxation. CPAs and attorneys are licensed at the state level and also have full representation rights, but many CPAs focus on accounting/auditing rather than tax controversy. Choose the professional whose experience matches your needs.
What a “family office” means—and our promise
A family office coordinates investment, tax, legal, insurance, estate, charitable giving, and cash‑flow management under one roof for families with complex finances. At The Simpson Firm, we aim to bring that family office experience to the everyday person—wrapping your taxes, retirement, and planning into one integrated strategy tailored to your goals.
Final notes & disclaimers
This article is educational and does not constitute financial, tax, or legal advice. To understand how these rules impact your situation, consider scheduling time with a licensed financial advisor or tax professional you trust.
If you’d like, I can tailor these concepts to your exact income, investments, and business setup—and help you create a quarterly tax playbook for 2026. Use the link below to schedule a complimentary consultation.
Written by Frank Simpson | Senior Private Wealth Advisor
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