The Internal Revenue Service (IRS) recently announced new changes to its tax system that could affect the federal tax liabilities for families in the United States. The changes are expected to be implemented next year.
The tax changes are part of the IRS' inflation-related adjustments for 2025. Some changes include raising the maximum amount of the earned income tax credit (EITC) and increasing the income threshold to qualify.
Here are the provisions that could specifically affect families in 2025.
Child Tax Credit
The IRS has not made any changes to the refundable portion of the child tax credit. Parents can still take $1,700 for qualifying children in the 2025 tax season.
The maximum child tax credit will remain $2,000 per child under the age of 17 for joint filers earning up to $400,000 in annual gross income and up to $200,000 for single filers.
However, it should be noted that the current child tax credit is set to expire at the end of the 2025 tax year. Should lawmakers fail to pass any measure, the credit will drop to a maximum of $1,000 per child.
Adoption Credit
Apart from EITC, the IRS also raised the maximum adoption credit for families adopting a child with special needs to $17,280. It is currently at $16,810.
Adoption credit essentially makes adoption more affordable by reducing the taxes owed by the adopting family. It can also cover adoption-related costs such as attorney and court fees and travel expenses.
EITC
For families, specifically those with three or more children, the maximum EITC will increase to $8,046 from $7,830 in the previous year.
This refundable tax credit is aimed at supporting low- to moderate-income working individuals and families. This provides households with more money to spend, especially if they are raising children.
Standard Deductions
For the tax year 2025, the IRS has raised its standard deduction by $400. This means the standard deduction will increase to $15,000 for single filers, $30,000 for married couples filing jointly, and $22,500 for heads of households, according to the IRS' announcement.
A standard deduction refers to the portion of a filer's income that is not subject to taxes. These deductions essentially reduce the amount of taxable income.
