With the Consumer Price Index (a measure of how much Americans pay for common household goods over time) lower than recent years but still persistently higher than the Fed's target rate of 2%, coupled with potential changes to your personal situation, your 2025 tax return could look different from last year's. Consult a tax advisor to get personalized help, but here are a few reasons you may owe taxes this year when you normally don't—or have a smaller or larger refund or tax bill.
Changes for everybody
Each year, the IRS announces changes to certain tax breaks, like refunds and deductions, and it's possible this year's adjustments could affect you.1. Marginal tax rate brackets changed
Whether your income went north or south—or even stayed the same—the rate at which your income is taxed could have changed when income ranges for the 7 federal tax brackets were adjusted for tax year 2025. Across the board, the brackets increased by 2.8% from 2024 because of inflation. For example, for single filers, the 22% tax bracket for the 2024 tax year started at $47,151 and ended at $100,525. It shifts up to between $48,476 and $103,350 for tax year 2025. What this means is that just because you were taxed at or above a marginal tax rate of 22% last year doesn't mean history will repeat itself, no matter what happened with your income.
2. The standard deduction changed
Taking the standard deduction means you lower your taxable income by the government's preset amount—no extra math or receipts required. For single filers and married individuals filing separately, that amount goes up $1,150 from 2024 to $15,750 in 2025. Married-filing-jointly filers can expect an increase of $2,300 for a deduction amount of $31,500. If you're 65 or older, the additional standard deduction you can claim has also gone up: For married filers, this amount increased to $1,600 for each eligible married filer and to $2,000 for single or head of household filers in 2025.
3. You're eligible for new deductions due to your age
Starting in 2025, those aged 65 and older can claim a deduction of up to $6,000 on their income. This deduction can be claimed regardless of whether eligible filers itemize or claim the standard deduction. Those with modified adjusted gross income (MAGI) over $75,000 (or $150,000 for joint filers) may have a reduced deduction.4. Certain tax credits and deductions changed
First things first: Know the difference between a tax credit, which reduces the dollar amount of taxes you owe, and a tax deduction, which reduces your taxable income. For example, if you owe $1,000 in taxes but receive a $250 credit, you owe $750. If you claim a $250 deduction, you do not pay taxes on that $250 of income. If your tax rate was 22%, that could reduce the amount of taxes you owe by $55—much less than a tax credit.
Here are a few credits and deductions that changed, potentially lowering your refund or resulting in a tax bill:
- Child Tax Credit: For tax year 2025, the max credit taxpayers can claim for each qualifying dependent children under 17 at the end of the tax year is $2,000. That's up $200 from 2024. For 2025, the credit begins to phase out at a MAGI of $400,000 for married couples filing jointly and $200,000 for all other filers and is partially refundable. The maximum refundable amount is $1,700 per qualifying child—even if you don't owe any tax. That's unchanged from 2024. Consider consulting with a tax professional to see if you're eligible for these credits.
- Adoption Credit: The max amount new adoptive parents may claim on qualified expenses went up to $17,280 for 2025 from $16,810 in 2024. The size of your credit begins lowering for taxpayers with MAGIs over $259,190 and is unavailable to filers with MAGIs of $299,190 or more.
- Earned Income Tax Credit: Available to low- to moderate-income filers who meet certain criteria, this credit maxed out at $632 for a taxpayer with no children in 2024. The credit is worth more for tax year 2025 with a limit of $649 for a single filer with no children, and goes up to $8,046 for taxpayers with 3 or more qualifying children.
- Student loan interest deduction: While the maximum deduction of up to $2,500 hasn't changed from 2024, the income eligibility limits have. For tax year 2025, joint filers with MAGI up to $170,000 can claim the whole deduction, and joint filers with MAGI up to $200,000 can deduct a portion. (This is up from $165,000 and $195,000, respectively, in 2024). The MAGI threshold for claiming this deduction also increased for single filers: from $80,000 in 2024 to $85,000 in 2025 to claim the entire deduction, with taxpayers with MAGIs up to $100,000 now being able to claim at least some deduction.
- Health savings account (HSA) and flexible spending account (FSA) deductible contributions: Contributing to these tax-advantaged accounts could lower your taxable income by even more for tax year 2025. If you maxed out your allowable contributions, you could lower your taxable income by $150 more than in 2024 for self-only HSA coverage and by $250 more for family HSA coverage. If you have an FSA, you can deduct $100 more—up to $3,300. And if you don't use all that money and your plan allows it, you can carry over up to $660 to the next year.
Changes you might have made
Life events happen, and when they do, they could affect your tax return—and potential refund.
5. You've gone green
Even if the Clean Vehicle Credit is no longer being offered for purchases of new vehicles, you can still claim a credit of up to $7,500 when you file if you purchased the vehicle before September 30, 2025 and have placed it in service.
If you made your home planet-friendlier, you may still qualify for the Residential Clean Energy Credit, which offers a 30% credit for costs related to things such as new solar, electric, or wind-energy equipment, along with other qualified clean energy property. There's also the Energy Efficient Home Improvement Credit, which offers a 30% credit for costs such as insulation and energy-saving windows. Note that these credits will not be allowed for home improvements that take place after 2025.
6. You sold NFTs
According to the IRS, "digital assets," which include virtual currencies, cryptocurrencies, and non-fungible tokens (NFTs), are considered property, not currency. That means their sale, exchange, transfer, or disposal are subject to capital gains tax, just as they are for stocks and bonds. If you hold one of these digital assets for more than a year, those long-term capital gains are taxed up to 20% at the federal level, but income thresholds for long-term capital gains tax rates shifted up once again from 2024 to 2025—by about 2.8% across all filing statuses. If you hold digital assets for a year or less, your capital gains are considered short-term and taxed as ordinary income, which can be as high as 37% depending on your federal tax bracket. Note that individual filers don't have to pay any federal capital gains tax if their total taxable income is $48,350 or less in 2025. The federal long-term capital gains rate is 15% if your income lies between that and $533,400. Make more than that? You'll pay the 20% rate.
Your state, county, or even city of residence may tax your capital gains as well, potentially contributing to a higher tax bill. There's also an additional 3.8% surtax on net investment income called the Net Investment Income Tax for high-income filers.
7. You got hitched
Newlywed? Congrats. If you file jointly, your tax bracket may change, and your standard deduction will increase. (See point 1 above.) But you may be hit with the marriage tax penalty, meaning you and your spouse pay more taxes as a couple than if you were filing as singles (which you can't do after "I do" … sorry). The penalty only kicks in if your combined income is over $751,600.
8. Your household grew
New addition to your family, such as a baby or elderly parent who moved in with you? You may qualify for the Child Tax Credit, Adoption Tax Credit, Child and Dependent Care Credit, and/or Credit for Other Dependents, which may lower what you owe—or boost your refund.
9. You worked remotely
If you worked remotely, you may owe taxes and have to file in multiple states. Some employers might calculate withholding for you but check your paycheck to confirm. Check with local tax authorities in the places you worked for filing requirements. You can also check state reciprocity agreements that allow you to skip filing multiple returns. And if you moved to one of 9 states with no income tax this calendar year, you'll file a federal return and possibly a final state return in your old state, depending on when you moved and established residency.
10. You started a side hustle
Freelancers, independent contractors, and the like usually get a 1099-NEC (non-employee compensation) form, a record of how much a business paid you. In a return to higher reporting thresholds that existed prior to 2024, if you received more than $20,000 in payments and conducted more than 200 transactions on a third-party platform like Venmo or PayPal during 2025, you should get a 1099-K form from that platform in early 2026. Neither these platforms, nor any company you contract for, are required to withhold federal and state taxes for non-employees, so it's on you to pay up—every quarter instead of once a year—or you can adjust your W-2 with your full-time job. And you may face penalties if you wait. Paying quarterly estimated taxes could help you avoid a big bill or possible penalties.
11. You live in a designated disaster area
The IRS has made certain accommodations for taxpayers affected by disasters in 2025, including farmers and ranchers affected by drought and taxpayers impacted by severe storms in more than a dozen states. In addition to extending filing and payment deadlines, the IRS will allow affected taxpayers to exclude qualified disaster relief payments from their gross income and to deduct losses as a part of their itemized deductions. For more details, visit IRS.gov.
Another provision allows eligible taxpayers to take a special disaster distribution from their retirement accounts without paying the 10% penalty assessed for early distributions. Be sure to check your plan rules for how this and other special provisions may apply to you.