What Changed for Federal Taxes in 2025
What to Watch Heading Into 2026
Most people feel the effects of tax changes only when they file. But the most significant wins often happen before filing—when you understand inflation adjustments, withholding, and the rules that changed mid-year.
Inflation adjustments: the “silent” annual change
Every year, the IRS publishes inflation-adjusted figures for many parts of the tax code—tax brackets, standard deductions, and more. These updates affect how much tax is withheld, whether you itemize deductions, and which planning strategies make sense. (IRS, 2024)
For planning purposes, here’s the practical point: even if your income stays the same, your tax outcome may shift because thresholds change.
Standard deduction changes you should not ignore
For many households, the standard deduction is the most significant single number on their return. The IRS has published guidance reflecting changes tied to the One Big Beautiful Bill Act (Public Law 119-21) and related inflation adjustments. (IRS, 2025b; IRS, 2025c)
If you’re used to “set it and forget it,” this is your reminder: standard deduction changes can alter whether itemizing makes sense—and can also change the payoff of charitable giving, mortgage interest, and SALT considerations depending on your situation.
Newer, time-limited provisions (planning matters more than ever)
Recent federal changes include provisions aimed at working Americans and seniors. The IRS has summarized several items as effective for tax year 2025, with some provisions time-limited. (IRS, 2025b)
Time-limited rules create a common trap: taxpayers assume they’re permanent, then plan poorly when they phase out. If a deduction or credit is temporary, it’s usually best to treat it as a planning window, not a lifestyle guarantee.
“Why is my refund different?”
Two things drive the Refund size:
Your final tax liability, and
How much you paid in during the year (withholding/estimated payments).
When laws change mid-year, withholding sometimes lags behind reality. That can produce surprises—bigger refunds for some, unexpected balances due for others.
A simple action checklist
Employees: review your W-4 if income, dependents, or side work changed.
Self-employed: reassess quarterly estimates if 2025 was higher (or lower) than expected.
Retirees: confirm how new deductions/thresholds interact with Social Security and other taxable income.
Everyone: keep a running “tax folder” so you don’t have to reconstruct life in March.
References
Internal Revenue Service. (2024). Rev. Proc. 2024-40: Inflation adjustments for tax year 2025 (Rev. Proc. 2024-40). https://www.irs.gov/pub/irs-drop/rp-24-40.pdf IRS Internal Revenue Service. (2025b, July 14). One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors (FS-2025-03). https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors IRS Internal Revenue Service. (2025c, October 9). IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill (News release). https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill IRS
