Lance's Corner

IRS Issues 2025 Tax Inflation Adjustments

Oct 22, 2024

Per the notice below, the United States Internal Revenue Service (IRS) has issued the tax inflation adjustments for 2025.

IRS releases tax inflation adjustments for tax year 2025

The Internal Revenue Service announced today the annual inflation adjustments for tax year 2025.  Revenue Procedure 2024-40 provides detailed information on adjustments and changes to more than 60 tax provisions that will impact taxpayers when they file their returns in 2026.

Notable changes for tax year 2025

The tax year 2025 adjustments described below generally apply to income tax returns to be filed starting tax season 2026.  The tax items for tax year 2025 of greatest interest to many taxpayers include the following dollar amounts:

  • Standard Deductions.  For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024.  For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024.  For heads of households, the standard deduction will be $22,500 for tax year 2024, an increase of $600 from the amount for tax year 2024.
  • Marginal Rates.  For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).  The other rates are:
    • 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
    • 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
    • 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
    • 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
    • 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
    • 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
  • Alternative Minimum Tax Exemption Amounts.  For tax year 2025, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350.  For married couples filing jointly, the exemption amount increases to $137,000 and begins to phase out at $1,252,700.
  • Earned Income Tax Credits.  For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024.  The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
  • Qualified Transportation Fringe Benefit.  For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing from $315 in tax year 2024.
  • Health Flexible Spending Cafeteria Plans.  For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024.  For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
  • Medical Savings Accounts.  For tax year 2025, participants who have self-only coverage the plan must have an annual deductible that is not less than $2,850 (a $50 increase from the previous tax year), but not more than $4,300 (an increase of $150 from the previous tax year).

The maximum out-of-pocket expense amount rises to $5,700, increasing from $5,550 in tax year 2024.  For family coverage in tax year 2025, the annual deductible is not less than $5,700, increasing from $5,550 in tax year 2024; however, the deductible cannot be more than $8,550, an increase of $200 versus the limit for tax year 2024.  For family coverage, the out-of-pocket expense limit is $10,500 for tax year 2025, rising from $10,200 in tax year 2024.

  • Foreign Earned Income Exclusion.  For tax year 2025, the foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.
  • Estate Tax Credits.  Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.
  • Annual Exclusion for Gifts increases to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
  • Adoption Credits.  For tax year 2025, the maximum credit allowed for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for tax year 2024.

Unchanged for tax year 2025

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

  • Personal Exemptions for tax year 2025 remain at 0, as in tax year 2024.  The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017.
  • Itemized Deductions.  There is no limitation on itemized deductions for tax year 2025, as in tax year 2024 and preceding, to tax year 2018.  The limitation on itemized deductions was eliminated by the Tax Cuts and Jobs Act of 2017.
  • Lifetime Learning Credits.  The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in Sec. 25A(d)(1) of the Internal Revenue Code is not adjusted for inflation for taxable years beginning after Dec. 31, 2020.  The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

USDOL Issues Comprehensive Employer Guidance on Long COVID

The United States Department of Labor (USDOL) has issued a comprehensive set of resources that can be accessed below for employers on dealing with Long COVID.

Supporting Employees with Long COVID: A Guide for Employers

The “Supporting Employees with Long COVID” guide from the USDOL-funded Employer Assistance and Resource Network on Disability Inclusion (EARN) and Job Accommodation Network (JAN) addresses the basics of Long COVID, including its intersection with mental health, and common workplace supports for different symptoms.  It also explores employers’ responsibilities to provide reasonable accommodations and answers frequently asked questions about Long COVID and employment, including inquiries related to telework and leave.

Download the guide

Accommodation and Compliance: Long COVID

The Long COVID Accommodation and Compliance webpage from the USDOL-funded Job Accommodation Network (JAN) helps employers and employees understand strategies for supporting workers with Long COVID.  Topics include Long COVID in the context of disability under the Americans with Disabilities Act (ADA), specific accommodation ideas based on limitations or work-related functions, common situations and solutions, and questions to consider when identifying effective accommodations for employees with Long COVID.  Find this and other Long COVID resources from JAN, below:

Long COVID, Disability and Underserved Communities: Recommendations for Employers

The research-to-practice brief “Long COVID, Disability and Underserved Communities” synthesizes an extensive review of documents, literature and data sources, conducted by the USDOL-funded Employer Assistance and Resource Network on Disability Inclusion (EARN) on the impact of Long COVID on employment, with a focus on demographic differences.  It also outlines recommended actions organizations can take to create a supportive and inclusive workplace culture for people with Long COVID, especially those with disabilities who belong to other historically underserved groups.

Read the brief

Long COVID and Disability Accommodations in the Workplace

The policy brief “Long COVID and Disability Accommodations in the Workplace” explores Long COVID’s impact on the workforce and provides examples of policy actions different states are taking to help affected people remain at work or return when ready.  It was developed by the National Conference of State Legislatures (NCSL) as part of its involvement in USDOL’s State Exchange on Employment and Disability (SEED) initiative.

Download the policy brief

Understanding and Addressing the Workplace Challenges Related to Long COVID

The report “Understanding and Addressing the Workplace Challenges Related to Long COVID” summarizes key themes and takeaways from an ePolicyWorks national online dialogue through which members of the public were invited to share their experiences and insights regarding workplace challenges posed by Long COVID.  The dialogue took place during summer 2022 and was hosted by USDOL and its agencies in collaboration with the Centers for Disease Control and Prevention and the U.S. Surgeon General.

Download the report

Working with Long COVID

The USDOL-published “Working with Long COVID” fact sheet shares strategies for supporting workers with Long COVID, including accommodations for common symptoms and resources for further guidance and assistance with specific situations.

Download the fact sheet

COVID-19: Long-Term Symptoms

This USDOL motion graphic informs workers with Long COVID that they may be entitled to temporary or long-term supports to help them stay on the job or return to work when ready, and shares where they can find related assistance.

Watch the motion graphic

A Personal Story of Long COVID and Disability Disclosure

In the podcast “A Personal Story of Long COVID and Disability Disclosure,” Pam Bingham, senior program manager for Intuit’s Diversity, Equity and Inclusion in Tech team, shares her personal experience of navigating Long COVID symptoms at work.  The segment was produced by the USDOL-funded Partnership on Employment and Accessible Technology (PEAT) as part of its ongoing “Future of Work” podcast series.

Listen to the podcast

HHS OIG Issues Annual Report on State MFCUs

Per the notice below, the Office of the Inspector General (OIG) of the United States Department of Health and Human Services (HHS) has issued its annual report on the performance of state Medicaid Fraud Control Units (MFCUs).

Medicaid Fraud Control Units Fiscal Year 2023 Annual Report (OEI-09-24-00200) 

Medicaid Fraud Control Units (MFCUs) investigate and prosecute Medicaid provider fraud and patient abuse or neglect. OIG is the Federal agency that oversees and annually approves federal funding for MFCUs through a recertification process. This new report analyzed the statistical data on annual case outcomes—such as convictions, civil settlements and judgments, and recoveries—that the 53 MFCUs submitted for Fiscal Year 2023.  New York data is as follows:

Outcomes

  • Investigations1 - 556
  • Indicted/Charged - 9
  • Convictions - 8
  • Civil Settlements/Judgments - 28
  • Recoveries2 - $73,204,518

Resources

  • MFCU Expenditures3 - $55,964,293
  • Staff on Board4 - 257

1Investigations are defined as the total number of open investigations at the end of the fiscal year.

2Recoveries are defined as the amount of money that defendants are required to pay as a result of a settlement, judgment, or prefiling settlement in criminal and civil cases and may not reflect actual collections.  Recoveries may involve cases that include participation by other Federal and State agencies.

3MFCU and Medicaid Expenditures include both State and Federal expenditures.

4Staff on Board is defined as the total number of staff employed by the Unit at the end of the fiscal year.

Read the Full Report

View the Statistical Chart

Engage with the Interactive Map

GAO Issues Report on Medicaid Managed Care Service Denials and Appeal Outcomes

The United States Government Accountability Office (GAO) has issued a report on federal use of state data on Medicaid managed care service denials and appeal outcomes.  GAO found that federal oversight is limited because it doesn't require states to report on Medicaid managed care service denials or appeal outcomes and there has not been much progress on plans to analyze and make the data publicly available.  To read the GAO report on federal use of state data on Medicaid managed care service denials and appeal outcomes, use the first link below.  To read GAO highlights of the report on federal use of state data on Medicaid managed care service denials and appeal outcomes, use the second link below.
https://www.gao.gov/assets/d24106627.pdf  (GAO report on federal use of state data on Medicaid managed care service denials and appeal outcomes)
https://www.gao.gov/assets/d24106627_high.pdf  (GAO highlights on federal use of state data on Medicaid managed care service denials and appeal outcomes)

CMS Issues Latest Medicare Regulatory Activities Update

The Centers for Medicare and Medicaid Services (CMS) has issued its latest update on its regulatory activities in the Medicare program.  While dentistry is only minimally connected to the Medicare program, Medicare drives the majority of health care policies and insurance reimbursement policies throughout the country.  Therefore, it always pays to keep a close eye on what CMS is doing in Medicare.  To read the latest CMS update on its regulatory activities in Medicare, use the link below.
https://www.cms.gov/training-education/medicare-learning-network/newsletter/2024-03-14-mlnc