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With the 2025 tax year just around the corner, changes to the US tax code are on the way. Some updates, income tax bracket adjustments, are pertinent to all Americans. However, several — like the Foreign Earned Income Exclusion (FEIE) threshold increase — are particularly relevant for expats.
While it’s important to stay on top of these changes, digging through the tax code probably isn’t your idea of a good time. That’s where Bright!Tax comes in. As a dedicated tax firm for US expats, reading up on IRS updates is second nature to us.
Below, we’ll summarize the most important tax changes for the 2025 tax year (aka the taxes you’ll file in 2026). Read on to learn all about income tax bracket adjustments, retirement contribution limit increases, expat tax break updates, and more.
IRS changes 2025: What do tax updates mean for US expats?
Each year, the IRS updates certain tax provisions — like income tax brackets, the standard deduction, and certain tax break limits — to keep pace with inflation. They do so to help ensure that taxes don’t increase for Americans whose purchasing power has decreased.
Some years have bigger tax changes than others. Adjustments for tax year 2023, for example, increased 7.1% year over year, while adjustments in 2024 increased by 5.4%. With inflation slowing down, the 2025 adjustments are smaller than years past: 2.8%. Still, being aware of these adjustments is important in helping you minimize your tax bill.
Minimum filing thresholds: Do you need to file?
As you may already know, all American citizens and permanent residents who earn above a certain amount must file (and potentially pay) US taxes — even if they live in another country. Here are the minimum income reporting thresholds for 2025:
| Filing status | Age at end of 2025 | Return filing threshold |
| Single | <65 | $15,000 |
| 65+ | $17,000 | |
| Head of household | <65 | $22,500 |
| 65+ | $24,500 | |
| Married filing jointly | <65 (both spouses) | $30,000 |
| 65+ (one spouse) | $31,600 | |
| 65+ (both spouses) | $33,200 | |
| Married filing separately | any age | $5 |
| Qualifying surviving spouse | <65 | $30,000 |
| 65+ | $31,600 |
Source: Intuit
Important: Those with net self-employment income exceeding $400 must also file an income tax return, regardless of their filing status.
All that said, even if filing isn’t required, it can be beneficial.
Tax deadlines for tax year 2025
Most Americans think of April 15th as the tax deadline. However, US expats get an automatic two-month extension to June 15th. Those who need more time can file Form 4868 to receive an extension until October 15th. If you write a letter to the IRS, you can request to extend the deadline even further to December 15th.
A tax filing extension is not the same as a tax payment extension, though. If you expect to owe taxes, you must make an estimated payment by April 15th to avoid penalties and interest — regardless of when you file your US tax return.
Key 2025 tax changes
Tax year 2025 will see updates across the board. Fortunately, almost all of them are beneficial for US expats. Here are some of the most noteworthy changes:
The Foreign Earned Income Exclusion (FEIE) will increase to $130,000
US expats who earn above the minimum income reporting thresholds and are subject to taxes in a foreign country may face tax bills in two different countries. Fortunately, the US offers a few tax breaks specifically for expats. One of the most important tax breaks is the Foreign Earned Income Exclusion, or FEIE.
The FEIE allows expats to exclude a certain amount of their foreign earned income from US income taxes. It applies only to earned income, though, such as salaries and self-employment earnings. Unfortunately, it does not apply to passive income (i.e. unearned income) such as interest and dividends.
Furthermore, it does not exclude foreign earned income from Social Security taxes. As a result, even self-employed expats who earn less than the $130,000 FEIE threshold typically must still pay 15.3% self-employment taxes.
The FEIE limit increases every year to account for inflation — here’s how it’s changed in recent years:
Foreign Earned Income Exclusion Amounts
| Tax year | Filing year | FEIE amount |
| 2025 | 2026 | $130,000 |
| 2024 | 2025 | $126,500 |
| 2023 | 2024 | $120,000 |
Note:
The Foreign Housing Exclusion (FHE) limit is tied to the FEIE limit, so it will increase as well in 2025. In 2025, the FHE base amount will increase to $20,800 while the maximum expense limit increases to $39,000.
The standard deduction will increase
The standard deduction is a fixed dollar amount that the IRS allows taxpayers to deduct from their income if they choose not to itemize deductions (e.g. medical expenses, self-employed business expenses, retirement contributions, etc.). In 2025, the standard tax deductions are as follows:
- $15,000 for individual filers & married couples filing separately
- $30,000 for married couples filing jointly
- $22,500 for heads of households
Those who are over 65 or blind can claim an additional deduction:
- $2,000 for single filers & heads of household
- $1,600 for married filers
Those who are both over 65 and blind can claim double their additional deduction.
As you may have noticed, there is some overlap between the standard deduction amounts and the minimum income reporting thresholds. Single filers, married couples filing jointly, and heads of household under 65 years old who earn less than their applicable standard deduction amount typically do not need to file a return.
Here’s how the standard deduction has changed over the years:
Standard deduction amounts for taxpayers under 65
| Tax Year | Single or Married Filing Separately | Married Filing Jointly | Head of Household |
| 2025 | $15,000 | $30,000 | $22,500 |
| 2024 | $14,600 | $29,200 | $21,900 |
| 2023 | $13,850 | $27,700 | $20,800 |
Itemizing deductions as a US expat
As we mentioned earlier, you can choose to itemize deductions instead of claiming the standard deduction. Before the Tax Cuts and Jobs Act (TCJA) of 2017, this is what many expats preferred, as the standard deduction was much lower. Since the passage of the TCJA, the standard deduction has more than doubled for most filers.
Income thresholds are increasing within each tax bracket
There are seven income tax rates in the US, ranging from 10% to 37%. These rates have income bands adjusted yearly to account for inflation. Reviewing these bands annually will help you understand which income tax bracket you fall into.
If your income is the same as it was last year, it’s unlikely you’ll move to a higher tax bracket thanks to the inflation adjustments. This process generally benefits taxpayers by reducing the risk of paying higher taxes due to inflation. Here’s a comparison of the income thresholds for single filers in tax years 2025 and 2024 to illustrate these adjustments:
| Tax Rate | Tax Year 2025 | Tax Year 2024 |
| 10% | Up to $11,925 | Up to $11,600 |
| 12% | $11,925 – $48,475 | $11,601 – $47,150 |
| 22% | $48,475 – $103,350 | $47,151 – $100,525 |
| 24% | $103,350 – $197,300 | $100,526 – $191,950 |
| 32% | $197,300 – $250,525 | $191,951 – $243,725 |
| 35% | $250,525 – $626,350 | $243,726 – $609,350 |
| 37% | $626,350+ | $609,350+ |
Now, let’s take a look at the income tax bands for all filers:
Income tax rates, 2025
| Tax Rate | Single filers, married couples filing separately | Married couples filing jointly | Heads of households |
| 10% | Up to $11,925 | Up to $23,850 | Up to $17,000 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 | $17,000 – $64,850 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 | $64,850 – $103,350 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 | $103,350 – $197,300 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 | $197,300 – $250,500 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 | $250,500 – $626,350 |
| 37% | $626,350+ | $751,600+ | $626,350+ |
Source: Tax Foundation
Gift tax exclusion increases to $19,000
In 2025, you will be able to make a gift of up to $19,000 — or $38,000 for married couples filing jointly — without having to pay gift tax. Here’s how the amount has changed over the years:
Annual gift tax exclusion
| Tax Year | Gift Tax Exclusion |
| 2025 | $19,000 |
| 2024 | $18,000 |
| 2023 | $17,000 |
Note:
Americans giving gifts to a spouse who isn’t a US citizen have a substantially higher exclusion ($190,000).
Some retirement contribution limits increase
As an expat, your retirement account options may look different than those of your stateside family and friends. That said, many US expats still contribute to US-based, tax-advantaged retirement accounts.
Here are the contribution limits by investment vehicle for taxpayers under 50 years old:
Retirement contribution limits, under 50
| Tax year | 401(k) | IRA | 403(b) | Most 457 plans |
| 2025 | $23,500 | $7,000 | $23,500 | $23,500 |
| 2024 | $23,000 | $7,000 | $23,000 | $23,000 |
While the contribution limits for 401(k), 403(b), and most 457 plans have increased by $500, IRA contribution limits remain the same as in 2024.
Catch-up contributions for those aged 50 or above remain the same in 2025. However, they will soon be subject to an annual cost-of-living increase thanks to the SECURE 2.0 Act. The act has also increased the contribution limits for taxpayers aged 60 to 63.
Catch-up retirement contribution limits, 2025
| 401(k) | IRA | 403(b) | Most 457 plans |
| $31,000 | $8,000 | $31,000 | $31,000 |
Note:
Employees aged 60 to 63 can contribute an additional $3,750 to their 401(k), 403(b), and most 457 plans.
Other notable changes in 2025
Several other notable tax code updates for tax year 2025 include:
- Alternative minimum tax exemption: Increases to $88,1000 for individual filers ($68,650 for married individuals filing separately) with phase-outs beginning at $626,350; increases to $137,000 for married couples filing jointly with phase-outs beginning at $1,252,700
- Estate tax credit: Estates of individuals who die in 2025 have a basic exclusion of $13,990,000 (up from $13,610,000 in 2024)
- Adoption credits: Credits for adopting a special needs child increase to $17,280 (vs. $16,810 in tax year 2024)
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