2025 Tax Season Guide
Major Tax Updates
Important Updates for 2025 Tax Filers & Booking Appointments Now Open!
Dear Valued Clients,
Tax season is upon us, and Sun Income Tax wants to ensure you’re fully prepared for the 2025 tax year filing season.
Major new tax legislation—the One Big Beautiful Bill Act (OBBBA)—was signed into law on July 4, 2025, bringing sweeping and impactful changes that may affect your tax return, refund, and planning strategies. IRS
Below is a comprehensive breakdown of the most important updates you need to know.
Ready to take the stress out of your tax season? Book an appointment!
2025 Tax Rate Updates:
Below are the marginal tax brackets the IRS uses for calculating federal income tax (for taxable income after deductions) in 2025.
| Tax rate | Single | Head of household | Married filing jointly or qualified surviving spouse | Married filing separately |
|---|---|---|---|---|
| 10% | $0 to $11,925 | $0 to $17,000 | $0 to $23,850 | $0 to $11,925 |
| 12% | $11,926 to $48,475 | $17,001 to $64,850 | $23,851 to $96,950 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $64,851 to $103,350 | $96,951 to $206,700 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $197,301 to $250,500 | $394,601 to $501,050 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $250,501 to $626,350 | $501,051 to $751,600 | $250,526 to $375,800 |
| 37% | $626,351 or more | $626,351 or more | $751,601 or more | $375,801 or more |
2025 Standard Deduction Rates:
The standard deduction is a fixed amount you can subtract from your income to reduce how much of it is taxed. The IRS lets most people take the standard deduction without having to prove anything.
Your standard deduction amount usually depends on your tax filing status. For example, people who are married and filing jointly get a bigger deduction than single filers. Those 65 and older or blind are also eligible for an additional standard deduction. However, if someone else claims you as a dependent (such as your parents), your standard deduction could be much lower than that of other statuses.
| Filing Status | Base Standard Deduction (all taxpayers) | Extra for Age 65+ (per qualifying person) | New Senior Bonus (2025–2028) | Notes on Phase-Out |
|---|---|---|---|---|
| Single | $15,750 | +$2,000 | +$6,000 | Bonus phases out above ~$75,000 MAGI, ends at ~$175,000 MAGI |
| Head of Household | $23,625 | +$2,000 | +$6,000 | Same income rules as Single |
| Married Filing Jointly | $31,500 | +$1,600 × each spouse | +$6,000 × each qualifying spouse (max $12,000) | Bonus phases out above ~$150,000 MAGI, ends at ~$250,000 MAGI |
| Married Filing Separately | $15,750 | +$1,600 | +$6,000 | Bonus treatment similar (income phase-outs apply) |
Taxpayers who are 65 or older and/or blind may qualify for an extra standard deduction on top of the base amounts above:
| Condition | Extra Deduction |
|---|---|
| Single or Head of Household (65+ or blind) | +$2,000 |
| Married Filing Jointly (per qualifying spouse) | +$1,600 |
| Double qualifies (65+ and blind) | Extra amount doubled |
Capital Gains Tax Rates
Profits from selling assets such as stocks, real estate, and cryptocurrency are subject to capital gains tax rates. Short-term gains (from assets held for one year or less) are taxed as ordinary income. Long-term gains (from assets held longer than a year) are taxed at a maximum rate of 20%. The 2025 long-term capital gains tax rates and brackets are as follows.
Key Notes:
Short-term capital gains (assets held 1 year or less) are taxed at your ordinary income tax rates (10%–37%). TurboTax
These capital gains rates apply before adding the Net Investment Income Tax (NIIT) of 3.8% for high-income filers, which can make the effective top rate up to 23.8% for many taxpayers. City National Bank
Special categories of gains (e.g., collectibles, qualified small business stock) may be taxed at higher maximum rates (e.g., 28% or 25%), separate from these tables.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 0% | $0 – $48,350 | $0 – $96,700 | $0 – $64,750 | $0 – $48,350 |
| 15% | $48,351 – $533,400 | $96,701 – $600,050 | $64,751 – $566,700 | $48,351 – $300,000 |
| 20% | Over $533,400 | Over $600,050 | Over $566,700 | Over $300,000 |
Other 2025 Tax Changes
New Deductions for Wage Income:
Overtime Pay: Up to $12,500 deduction for qualified overtime compensation.
Tip Income: Up to $25,000 deduction for tips already reported as income.
These are above-the-line deductions and can reduce adjusted gross income (AGI) before itemized or standard deductions
Taxpayers may now deduct up to $10,000 of interest on a qualified personal vehicle loan—subject to income limits and other rules. See all rules and special qualifications here!
AZ Tax Credit Donations: Visit our link to learn more!
All credits are nonrefundable but unused amounts (except some special funds) may carry forward up to five years.
Donations must be in cash/ACH eCheck to qualify; in-kind gifts typically do not qualify for these credits.
Contributions made by April 15, 2026 can be claimed on the 2025 Arizona return.
You can stack multiple credits in the same tax year (e.g., public school + QCO + QFCO + private school tax credits) as long as your tax liability supports them
| Credit Category (Form) | Donation Purpose | Max Credit (Single/Head of Household/Married Filing Separate) | Max Credit (Married Filing Jointly) |
|---|---|---|---|
| Qualifying Charitable Organizations (QCO) (Form 321) | Cash donations to charities providing basic needs to low-income, TANF recipients, chronically ill & disabled Arizonans | $495 | $987 |
| Qualifying Foster Care Charitable Organizations (QFCO) (Form 352) | Cash donations to foster care support organizations | $618 | $1,234 |
| Public School Tax Credit (Form 322) | Cash contributions or eligible fees to Arizona public/charter schools for extracurricular & character education programs | $200 | $400 |
| Private School Tuition Organization Credit (Form 323) | Cash donations to certified private school tuition scholarship organizations (Original) | $769 | $1,535 |
| Certified School Tuition Organization “Switcher/PLUS” Credit (Form 348) | Additional credit after maxing the original school tuition credit | $766 | $1,527 |
Expanded SALT Deduction Limit
For the 2025 tax year, the state and local tax (SALT) deduction limit is now up to $40,000 (up from $10,000), though it begins to phase out at high income levels.
“Trump Accounts” & Other New Incentives
A new type of tax-exempt savings account has been established for children born between 2025 and 2028. These accounts are intended for qualified expenses like education or first-time home purchases and include government seed funding.Visit trumpaccounts.gov to learn more.
Some Tax Credits & Deductions Were Changed or Eliminated
The legislation also:
Makes permanent the elimination of personal exemptions. IRS
Removes some itemized deductions permanently (like miscellaneous expenses).
Limits certain energy and EV tax credits after 2025.
These changes may affect itemizers, especially if you previously relied on now-eliminated credits.
Refund & Withholding Impacts
According to tax analyses, many taxpayers may see larger refunds compared to prior years due to lower withholding and expanded deductions and credits. This also means that withholdings from paychecks may need adjustment for 2026 to avoid overpayment.