William Martensen is a seasoned enrolled agent and founder of Martensen Tax & Financial in San Juan Capistrano, California. With more than 15 years of experience and a client base exceeding 600 individuals and businesses, he delivers comprehensive services that range from tax planning and preparation to IRS audit representation, conflict resolution, and virtual consultations.
photo credit: WilliamMartensen.com
A graduate of the University of Arizona’s Eller College of Business, Mr. Martensen is widely recognized for translating complex tax regulations into clear, actionable strategies that minimize liabilities and manage risk. His commitment to integrity and community service further underscores his credibility as a trusted authority in tax and financial matters.
Several federal tax changes and adjustments have taken effect in 2025, starting with the IRS’ annual adjusting of tax provisions for inflation. This practice helps avoid “bracket creep,” when inflation instead of income rise degrades deductions and credits and moves individuals into higher tax brackets.
The Bureau of Labor Statistics-designed Chained Consumer Price Index (C-CPI) determines the adjustment. The C-CPI reflects a survey of 7,000 American families on a fixed basket of around 80,000 goods and services each month. In place since 2017, the C-CPI expands on the traditional Consumer Price Index (CPI) by assessing consumer buying patterns before and after price changes. This avoids an issue with the traditional CPI, with consumers shifting buying patterns when prices rise or fall. Their total bills often do not change that much because they have altered what they buy (for example, packaged cereal instead of eggs).
For 2025, the IRS increased the standard deduction for married couples filing separately and single taxpayers. The increase was $800 to $30,000 for married couples filing jointly and $600 to $22,500 for heads of households. The federal estate tax exclusion rose from $13.61 million to $13.99 million, and the maximum Earned Income Tax Credit for qualifying taxpayers with three or more qualifying children rose from $7,830 to $8,046. The maximum child tax credit stayed at $2,000 per qualifying child, with the refundable amount still $1,700.
The alternative minimum tax (AMT) exemption also increased in 2025. Since 1969, the AMT has applied to high-income taxpayers who might otherwise claim benefits to bring their taxable income as low as zero. The AMT limits such benefits, holding taxpayers liable for a minimum tax. The AMT exemption defines the income threshold under which taxpayers with low incomes do not need to adjust their taxes using AMT tables. The threshold increased to $88,100 among single taxpayers and began phasing out at $626,350. The AMT exemption is $68,650 for married couples filing separately and $137,000 for married couples filing jointly, starting to phase out at $1,252,700.
The IRS also made several retirement account changes in 2025, with individuals now able to contribute $23,500 to 401(k) plans (up from $23,000 the previous year). This amount also applies to governmental 457 plans, 403(b) plans, and the Thrift Savings Plan of the federal government. Those aged 50 and older can still add $7,500 to this amount with the 401(k) catch-up contribution limit remaining unchanged. However, under SECURE 2.0, the catch-up contribution limit for those aged 60 to 63 has risen from $7,500 to $11,250.
Roth IRA contributions have an increased income phase-out range. For single taxpayers and heads of household, this amount is $150,000 to $165,000, and for married couples filing jointly, it is $146,000 to $161,000. For married couples filing separate returns, the phase-out range for Roth IRA contributions remains $0 to $10,000.
A prominent campaign promise of the current administration was eliminating taxes on Social Security benefits. This tax move is unlikely since it would require 60 votes in the Senate and substantial bipartisan support.
