2025 Inflation-adjusted items
On Oct. 22, 2024, the IRS released its annual revenue procedure containing the inflation-adjusted items for 2025. There are multiple provisions in the Internal Revenue Code that require the IRS to adjust the applicable dollar amounts for inflation – many of these relate to individual income taxes, while others relate to business income. Selected inflation-adjusted items are listed below. For items impact exempt organization, please review our prior article here. For the full listing of inflation items, please review the linked revenue procedure.
Individual tax rate tables -The highest tax rate remains at 37%. This rate is applicable for taxable income over:
- $751,600 for married filing jointly
- $375,800 for married filing separately
- $626,350 for single filing taxpayers
- $626,350 for head of household
The top capital gains rate of 15% is applicable for taxable income over:
- $600,050 for married filing jointly
- $300,000 for married filing separately
- $533,400 for single filing taxpayers
- $566,700 for head of household
Estate and trust tax rate table - The estate and trust income tax rate is 37% for taxable income over $15,650. The 15% capital gains rate is applicable for estates and trusts with taxable income over $15,900.
Cafeteria plans – The annual limitation under section 125 for contributions to a health flexible spending account increased from $3,200 to $3,300.
Qualified transportation fringe benefit – The section 132(f) monthly limitation for qualified transportation (in a commuter vehicle or mass transit passes) and qualified parking increased from $315 per month to $325 per month.
Election to expense certain depreciable assets under section 179 - Rev. Proc. 2024-40 raises the section 179 expensing limit under section 179(b)(1) to $1,250,000. The cost limit for sport utility vehicles expensed under section 179 will be $31,300. Under section 179(b)(2), the $1,250,000 limitation gets reduced by the amount that section 179 property placed in service during the 2025 taxable year exceeds $3,130,000.
Energy efficient commercial buildings deduction - the dollar value of the maximum allowance for the deduction under section 179D(b)(2) is set at 58 cents, which gets increased by 2 cents for every percentage point of certified energy and power reduction over the 25% threshold. Rev. Proc. 2024-40 raises the cap on the deduction to $1.16. The increased deduction for certain property under section 179D(b)(3) (i.e., building projects meeting certain prevailing wage and apprenticeship requirements) is set at $2.90 increased by 12 cents for every percentage point of certified energy and power reduction over the 25% threshold, with a $5.81 maximum.