In 2025, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The federal income tax has seven tax rates in 2025: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The top marginal income tax rate of 37 percent will hit taxpayers with taxable income above $626,350 for single filers and above $751,600 for married couples filing jointly.

Table 1. Tax Brackets and Rates, 2025 (Source: IRS)

The standard deduction will increase by $400 for single filers and by $800 for joint filers (Table 2). Seniors over age 65 may claim an additional standard deduction of $2,000 for single filers and $1,600 for joint filers.

The personal exemption for 2025 remains at $0 (eliminating the personal exemption was part of the Tax Cuts and Jobs Act of 2017 (TCJA)

Table 2. 2025 Standard Deduction and Personal Exemption (Source: IRS)

 The alternative minimum tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel income tax system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called alternative minimum taxable income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, the exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2025 is $88,100 for singles and $137,000 for married couples filing jointly (Table 3).

Table 3. 2025 Alternative Minimum Tax (AMT) Exemptions (Source: IRS)

In 2025, the 28 percent AMT rate applies to excess AMTI of $239,100 for all taxpayers ($119,550 for married couples filing separate returns).

AMT exemptions phase out at 25 cents per dollar earned once AMTI reaches $626,350 for single filers and $1,252,700 for married taxpayers filing jointly (Table 4).

Table 4. 2025 Alternative Minimum Tax (AMT) Exemption Phaseout Thresholds (Source: IRS)

The maximum earned income tax credit (EITC) in 2025 for single and joint filers is $649 if the filer has no children (Table 5). The maximum credit is $4,328 for one child, $7,152 for two children, and $8,046 for three or more children.

Table 5. 2025 Earned Income Tax Credit (EITC) Parameters (Source IRS)

The maximum child tax credit is $2,000 per qualifying child and is not adjusted for inflation. The refundable portion of the child tax credit is adjusted for inflation and will remain at $1,700 for 2025.

The Tax Cuts and Jobs Act of 2017 (TCJA) includes a 20 percent deduction for pass-through businesses. Limits on the deduction begin phasing in for taxpayers with income above $197,300 (or $394,600 for joint filers) in 2025 (Table 6).

Table 6. 2025 Qualified Business Income Deduction Thresholds (Source: IRS)

In 2025, the first $19,000 of gifts to any person are excluded from tax, up from $18,000. The exclusion is increased to $190,000 from $185,000 for gifts to spouses who are not citizens of the United States.

Long-term capital gains face different brackets and rates than ordinary income (Table 7).

Table 7. 2025 Capital Gains Tax Brackets (Source IRS)

Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they’re safe provided they retain their documents for this period of time. Even if the original records are provided only on paper,they can be scanned and converted to a digital format. Once the documents are in electronic form,taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD (don’t forget to label it).

Create a Backup Set of Records and Store Them Electronically.
Keeping a backup set of records — including, for example, bank statements, tax returns, insurance policies, etc. — is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet.You might also consider online backup, which is the only way to ensure that data is fully protected.With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.

Caution: Identity theft is a serious threat in today’s world, and it is important to take every precaution to avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.

However, if the IRS believes you have significantly under reported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe,use the following guidelines:
Business Documents To Keep For One Year
Correspondence with Customers and Vendors
Duplicate Deposit Slips
Purchase Orders (other than Purchasing Department copy)
Receiving Sheets
Requisitions
Stenographer’s Notebooks
Stockroom Withdrawal Forms
Business Documents To Keep For Three Years
Employee Personnel Records (after termination)
Employment Applications
Expired Insurance Policies
General Correspondence

Internal Audit Reports
Internal Reports
Petty Cash Vouchers
Physical Inventory Tags
Savings Bond Registration Records of Employees
Time Cards For Hourly Employees

Business Documents To Keep For Six Years
Accident Reports, Claims
Accounts Payable Ledgers and Schedules
Accounts Receivable Ledgers and Schedules
Bank Statements and Reconciliations
Cancelled Checks
Cancelled Stock and Bond Certifi cates
Employment Tax Records
Expense Analysis and Expense Distribution Schedules
Expired Contracts, Leases
Expired Option Records
Inventories of Products, Materials, Supplies
Invoices to Customers
Notes Receivable Ledgers, Schedules
Payroll Records and Summaries, including payment to pensioners
Plant Cost Ledgers
Purchasing Department Copies of Purchase Orders
Sales Records
Subsidiary Ledgers
Time Books
Travel and Entertainment Records
Vouchers for Payments to Vendors, Employees, etc.
Voucher Register, Schedules
Special Circumstances
Car Records (keep until the car is sold)
Credit Card Receipts (keep with your credit card statement)
Insurance Policies (keep for the life of the policy)
Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
Pay Stubs (keep until reconciled with your W-2)
Property Records / improvement receipts (keep until property sold)
Sales Receipts (keep for life of the warranty)
Stock and Bond Records (keep for 6 years beyond selling)
Warranties and Instructions (keep for the life of the product)
Other Bills (keep until payment is verifi ed on the next bill)
Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of theasset)
Personal Documents To Keep For One Year
Bank Statements

Paycheck Stubs (reconcile with W-2)
Canceled checks
Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year endstatement)
Personal Documents To Keep For Three Years
Credit Card Statements
Medical Bills (in case of insurance disputes)
Utility Records
Expired Insurance Policies
Personal Documents To Keep For Six Years
Supporting Documents For Tax Returns
Accident Reports and Claims
Medical Bills (if tax-related)
Property Records / Improvement Receipts
Sales Receipts
Wage Garnishments
Other Tax-Related Bills
Personal Records To Keep Forever
CPA Audit Reports
Legal Records
Important Correspondence
Income Tax Returns
Income Tax Payment Checks
Investment Trade Confi rmations
Retirement and Pension Records
Business Records To Keep Forever
While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.
Audit Reports from CPAs/Accountants
Cancelled Checks for Important Payments (especially tax payments)
Cash Books, Charts of Accounts
Contracts, Leases Currently in Eff ect
Corporate Documents (incorporation, charter, by-laws, etc.)
Documents substantiating fi xed asset additions
Deeds
Depreciation Schedules
Financial Statements (Year End)
General and Private Ledgers, Year End Trial Balances
Insurance Records, Current Accident Reports, Claims, Policies
Investment Trade Confi rmations
IRS Revenue Agents’ Reports
Journals
Legal Records, Correspondence and Other Important Matters
Minute Books of Directors and Stockholders
Mortgages, Bills of Sale

Property Appraisals by Outside Appraisers

Property Records
Retirement and Pension Records
Tax Returns and Worksheets
Trademark and Patent Registrations