With the IRS’s new tax updates for 2025, families across the U.S. will need to prepare for changes that could impact their federal tax liabilities. These changes include adjustments to important tax credits and exclusions that benefit families, such as the earned income tax credit (EITC) and the adoption credit. While some figures remain the same, others have been modified to account for inflation and will affect how families file their taxes in 2025.
Here’s what families need to know about the most significant tax updates for 2025, and how these changes could influence your financial planning for the upcoming tax season.
Key Points:
- New IRS tax adjustments for 2025 may influence family tax liabilities.
- Changes include adjustments to the Earned Income Tax Credit (EITC), adoption credit, and annual gift tax exclusion.
- The child tax credit remains the same at $1,700 for the refundable portion, with potential changes looming for 2026.
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Key Highlights:
- The earned income tax credit (EITC) for qualifying families with three or more children will increase to $8,046 in 2025.
- The child tax credit remains unchanged at $1,700 for the refundable portion.
- Income thresholds for tax credits have been adjusted to account for inflation.
- The adoption credit rises to $17,280 for qualified expenses in 2025.
IRS Changes to Federal Tax Credits in 2025
1. Child Tax Credit for 2025
The child tax credit offers a significant benefit for families with children under 17. The refundable portion of this credit, which allows families to claim the credit even with a zero-tax balance, will remain $1,700 for 2025. However, the overall credit will continue to be $2,000 per child, which remains available to parents earning up to $400,000 for married couples filing jointly or $200,000 for single filers.
Important Note:
This version of the child tax credit is set to expire after the 2025 tax year. Unless Congress enacts new legislation, the credit is scheduled to decrease to $1,000 per child in 2026.
2. Earned Income Tax Credit (EITC) for 2025
The EITC provides substantial relief for low- and middle-income families. This tax credit helps families reduce the amount of taxes they owe, and in some cases, provides a refund. For 2025, the maximum EITC for families with three or more children will increase to $8,046, up from $7,830 in 2024.
Other maximum EITC amounts include:
- Families with two children: $7,152 (up from $6,960).
- Families with one child: $4,328 (up from $4,213).
- For taxpayers with no children: $649 (up from $632).
Income thresholds to qualify for the EITC will also increase in 2025. Married couples with three or more children can qualify with an adjusted gross income (AGI) of up to $68,675, while single filers with three or more children can qualify with an AGI of up to $61,555.
3. Adoption Credit for 2025
If your family is adopting, 2025 brings good news. The maximum adoption credit for qualified expenses will rise to $17,280, compared to $16,810 in 2024. This credit is designed to offset the high costs of adoption, especially for families adopting children with special needs.
4. Annual Gift Tax Exclusion for 2025
The IRS has also raised the annual gift tax exclusion to $19,000, up from $18,000 in 2024. This exclusion allows you to give up to $19,000 per person per year without incurring federal gift tax.
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Earned Income Tax Credit for 2025
| Children/Relatives Claimed | Single, Head of Household, or Widowed (Max AGI) | Married Filing Jointly (Max AGI) | Maximum EITC for 2025 |
|---|---|---|---|
| Zero | $19,104 | $26,214 | $649 |
| One | $50,434 | $57,554 | $4,328 |
| Two | $57,310 | $64,430 | $7,152 |
| Three or more | $61,555 | $68,675 | $8,046 |
Tax Liabilities in 2026: What to Expect
Although the new adjustments provide relief for 2025, families should prepare for potential increases in tax liabilities starting in 2026. Key provisions from the Tax Cuts and Jobs Act of 2017 are set to expire, including the higher child tax credit and other beneficial tax deductions. Without intervention from Congress, families may see higher tax bills beginning in 2026.
According to tax experts, unless the current tax provisions are extended, families will need to adjust their financial strategies to handle the increased liabilities that may arise after 2025.
How to Prepare for Tax Changes in 2025
To prepare for these changes, it’s important to stay informed about potential shifts in tax policies and make sure to adjust your tax filing strategies. Families should work with tax professionals to ensure they’re maximizing credits like the EITC and child tax credit, as well as planning for any future changes that may occur in 2026.
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FAQs About Tax Changes in 2025
The maximum child tax credit is $2,000 per child, with a refundable portion of $1,700.
The maximum EITC for families with three or more children will be $8,046.
The maximum adoption credit for 2025 will be $17,280 for qualified expenses.
Unless Congress extends the provisions of the Tax Cuts and Jobs Act of 2017, tax liabilities may increase in 2026 due to the expiration of key credits and deductions.
The annual gift tax exclusion will be $19,000 per person in 2025.
Conclusion
With new IRS tax adjustments set for 2025, families can benefit from inflation-related increases to credits like the EITC and adoption credit. However, it’s crucial to plan for potential changes in 2026, which could see higher tax liabilities if current provisions expire. Stay informed and work with tax professionals to ensure that you are maximizing your tax benefits and preparing for the years ahead.