New tax changes for 2025 could impact federal tax liabilities for families.

• The IRS has announced new tax changes for 2025 that may impact families' tax liabilities.
• The amount of the refundable portion of the child tax credit will remain at $1,700 in 2024.
• Parents may also be affected by changes to the earned income tax credit, adoption credit, and annual gift tax exclusion.

Changes in IRS policies could impact federal tax obligations for families in 2025.

The agency announced on Tuesday that it had increased the maximum amount of the earned income tax credit and the income thresholds to qualify, while leaving the maximum refundable portion of the child tax credit unchanged.

The IRS inflation-related adjustments for 2025 include provisions that increase the federal income tax brackets, long-term capital gains tax brackets, and the estate and gift tax exemption, among other changes.

In 2025, the IRS has announced new federal income tax brackets. It is important for advisors to prepare for the potential expiration of Trump's tax cuts after that year. To avoid any last-minute stress, it is recommended to find a tax preparer early on.

Child tax credit for 2025

The amount that families can claim for the refundable portion of the child tax credit, which is a tax break for qualifying children, will remain at $1,700 for 2025, the same as in 2024. This figure applies even if families have a zero tax balance on their tax returns.

The maximum child tax credit of $2,000 per child under 17 is available to parents with up to $400,000 in modified adjusted gross income if they are married and filing jointly, or under $200,000 if they are single. This amount remains the same for 2024.

The child tax credit, which currently provides up to $2,000 per child, is set to expire at the end of tax year 2025, after which it will decrease to a maximum of $1,000 per child.

Proposals to make the credit more generous have been advocated for by lawmakers on both sides of the aisle.

The Tax Foundation's economist, Alex Durante, stated that the new changes for 2025 are standard adjustments for inflation to prevent taxpayers from facing higher tax liabilities. These changes still reflect the Tax Cuts and Jobs Act of 2017.

Unless Congress extends the tax provisions implemented in 2017, families can expect higher tax liabilities in 2026, according to Durante.

Earned income tax credit for 2025

In 2025, the earned income tax credit (EITC), which offers a tax credit to low- to middle-income individuals and families, will have increased maximum amounts.

The IRS states that the earned income tax credit reduces the tax burden for qualifying individuals and families, and may even result in a refund.

The EITC amount for qualifying taxpayers with three or more eligible children will increase from $7,830 in 2024 to $8,046 in 2025.

In 2024, the maximum amount available for qualifying taxpayers with two eligible children will be $7,152, an increase from $6,960 this year. For one qualifying child, the amount will be $4,328, an increase from $4,213 this year. If a taxpayer has no qualifying children, the amount will be $649, an increase from $632 this year.

To be eligible for the tax credit, individuals and families must have an adjusted gross income below certain thresholds, which are calculated by subtracting eligible deductions from total income.

In 2025, the maximum AGI to qualify for the EITC for married couples with three or more children will be $68,675, an increase from $66,819 in 2024. Similarly, for single, head of household and widowed filers with three or more children, the EITC will be $61,555, adjusted from $59,899 in 2024. However, the EITC is subject to phaseout thresholds.

The earned income tax credit has a limit on the amount of investment income taxpayers can have in order to qualify. In 2025, this threshold will increase from $11,600 to $11,950. If investment income exceeds this amount in 2025, taxpayers will not receive the credit.

Adoption, gift tax exclusion changes

Other changes announced by the IRS may also affect families.

In 2025, the maximum adoption credit for a child, including those with special needs, will cover qualified expenses of up to $17,280, an increase from $16,810 in 2024.

In 2025, if taxpayers give $19,000 to each of their children, the annual exclusion will apply to each gift.