Prepare for tax season with 2025’s latest updates. Discover what’s new and how the changes could impact your business.
With the turn of the year comes new tax laws that could affect your 2025 filings and financial planning. While additional changes may be on the way with the new administration taking office, there’s already plenty to unpack. From newly introduced requirements and expiring provisions to annual inflation adjustments, here are the key tax updates you should know.
New Form 1099-K requirements
After years of proposing new 1099-K reporting requirements, the IRS is finally rolling them out. Third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces, are required to issue Form 1099-K to users whose total payments equal more than $5,000 in 2024, $2,500 in 2025, and $600 in 2026. This is a drastic change from previous years where payment forms were only required if users received over $20,000 and had over 200 transactions during a tax year.
If you received more than $5,000 in payments for goods and services through an online marketplace or payment app in 2024 (e.g. Venmo, PayPal, Upwork, etc.), keep an eye out for Form 1099-K. Conversely, if you operate a business that’s considered a TPSO, you’ll be responsible for issuing 1099-K forms to users according to the new requirements.
Note: Taxpayers are required to report all income regardless of receiving forms like a 1099-K that document it.
Tax Cuts and Jobs Act expiration
The Tax Cuts and Jobs Act (TCJA) was a major tax overhaul that went into effect in 2017, changing a variety of deductions, credits, and other tax rules. For example, it added a deduction of up to 20% of qualified business income for owners of some businesses, reduced most of the tax rates, and increased the income thresholds for several tax brackets. Many of the changes in the TCJA, however, are scheduled to expire at the end of 2025 which will mean tax increases. While Congress is currently considering extensions, no decisions have been announced yet.
Direct File program expansion
The IRS Direct File program was introduced as a pilot during the 2024 tax filing season, allowing eligible taxpayers in 12 states to file their federal tax returns directly with the IRS for free. After a successful test year, the program is expanding to taxpayers in 25 states. This can be a good option if you live in an eligible state and have a simple tax return to file (e.g. no itemized deductions, gig work, rental income). You can find more details on the IRS Direct File landing page.
Standard deduction annual increase
Each year, you have a decision to make between itemizing deductions or taking the standard deduction on your personal tax return. The better choice for any given situation depends on the amount of eligible expenses you can deduct along with your preferences. While the standard deduction can be quicker and easier, it won’t always save you the most money. As per the usual, the standard deduction increased this year to keep up with inflation. Here’s how it’s changed over the three most recent tax years.
| Tax Year 2023 | Tax Year 2024 | Tax Year 2025 | |
| Single taxpayers and married individuals filing separately | $13,850 | $14,600 | $15,000 |
| Heads of household | $20,800 | $21,900 | $23,500 |
| Married couples filing jointly | $27,700 | $29,200 | $30,000 |
Marginal tax rate annual income limit increases
Although the tax rates have remained consistent in recent years, the income thresholds for each are adjusted annually to keep pace with inflation. Below, is a comparison of how they’ve evolved over the most recent three tax years.
| Tax Rate | Tax Year 2023 Income Limit | Tax Year 2024 Income Limit | Tax Year 2025 Income Limit |
| 37% | $578,125 for individuals ($693,750 for married couples filing jointly) | $609,350 for individuals ($731,200 for married couples filing jointly) | $626,350 for individuals ($751,600 for married couples filing jointly) |
| 35% | $231,250 for individuals ($462,500 for married couples filing jointly). | $243,725 for individuals ($487,450 for married couples filing jointly) | $250,525 for individuals ($501,050 for married couples filing jointly). |
| 32% | $182,100 for individuals ($364,200 for married couples filing jointly) | $191,950 for individuals ($383,900 for married couples filing jointly) | $197,300 for individuals ($394,600 for married couples filing jointly) |
| 24% | $95,375 for individuals ($190,750 for married couples filing jointly) | $100,525 for individuals ($201,050 for married couples filing jointly) | $103,350 for individuals ($206,700 for married couples filing jointly) |
| 22% | $44,725 for individuals ($89,450 for married couples filing jointly) | $47,150 for individuals ($94,300 for married couples filing jointly) | $48,475 for individuals ($96,950 for married couples filing jointly) |
| 12% | $11,000 for individuals ($22,000 for married couples filing jointly) | $11,600 for individuals ($23,200 for married couples filing jointly) | $11,925 for individuals ($23,850 for married couples filing jointly) |
| 10% | $11,000 or less for individuals ($22,000 for married couples filing jointly) | $11,600 or less for individuals ($23,200 for married couples filing jointly) | $11,925 or less for individuals ($23,850 or less for married couples filing jointly) |
Other notable annual increases
The IRS also makes a variety of other annual tax adjustments to account for inflation. Here’s a look at some of the notable increases that may impact your bottom line.
| Tax Year 2023 | Tax Year 2024 | Tax Year 2025 | |
| Maximum Earned Income Tax Credit | $7,430 | $7,830 | $8,046 |
| Qualified Transportation Fringe Benefit | $300 | $315 | $325 |
| Foreign Earned Income Inclusion | $120,000 | $126,500 | $130,000 |
| Estate Basic Exclusion | $12,920,000 | $13,610,000 | $13,990,000 |
| Annual Exclusion for Gifts | $17,000 | $18,000 | $19,000 |
| Standard Mileage Rate | $0.65 per mile | $0.67 per mile | $0.70 per mile |
| Annual Contribution Limit for 401(k), 403(b), 457, and Thrift Savings Plans | $22,500, $30,000 for employees over 50 | $23,000, $30,500 for employees over 50 | $23,500, $31,000 for employees over 50, and $34,750 for employees 60 to 63 |
| Annual Contribution Limits for IRA | $6,500, $7,500 for employees over 50 | $7,000, $8,000 for employees over 50 | $7,000, $8,000 for employees over 50 |
Streamline tax preparation with Lili
One thing you can count on is the continuous evolution of tax laws. Every year, adjustments are made across the board for inflation. Then, you have all the other changes like new reporting requirements, new ways to file, and the expiration of previous provisions. Staying informed about these updates—and making the necessary tweaks to your strategy—can save you from unnecessary headaches.
Tools like Lili also make it easier to stay on top of your finances and prepare for tax season. With features like automated transaction sorting, tax savings accounts, and pre-filled tax forms, you can spend less time on accounting and more time growing your business. Now’s the ideal time to implement a system that makes tax preparation easier for next year.
See how Lili can help you simplify your tax preparation!
