In 2025, the foreign-earned income exclusion amount is $130,000, up from $126,500 in tax year 2024.
Federal Estate & Gift Tax
The federal estate tax exclusion for decedents dying will increase to $13,990,000 per person (up from $13,610,000 in 2024) or $27,980,000 per married couple in 2025. (The exclusion could take a dip in 2026 if Congress allows it to sunset to pre-TCJA values.)
The federal gift tax exclusion will increase to $19,000 in 2025, up from $18,000 in 2024. That means you can gift $19,000 per person to as many people as you want with no federal gift tax consequences in 2025; if you split gifts with your spouse, that total is $38,000. If your spouse is not a U.S. citizen, tax-free gifts are limited to present interest gifts whose total value is below the annual exclusion amount, which is $190,000 in 2025 (it was $185,000 in 2024).
Itemized Deductions
Itemized deductions found on Schedule A have not changed. Here’s a refresher on some of the most common:
Medical and Dental Expenses. The “floor” for medical and dental expenses is 7.5% in 2025, which means you can only deduct those expenses which exceed 7.5% of your AGI.
State and Local Taxes. Deductions for state and local sales, income, and property taxes remain in place and are limited to a combined total of $10,000, or $5,000 for married taxpayers filing separately.
Home Mortgage Interest. You may only deduct interest on acquisition indebtedness—your mortgage used to buy, build or improve your home—up to $750,000, or $375,000 for married taxpayers filing separately. For more on mortgage interest under the TCJA, click here.
Charitable Donations. As a result of tax reform, the percentage limit for charitable cash donations to public charities increased from 50% to 60% in 2018 and will remain at 60% for 2025.
Casualty and Theft Losses. The deduction for personal casualty and theft losses has been repealed except for losses attributable to a federal disaster area.
Job Expenses and Miscellaneous Deductions subject to 2% floor. Miscellaneous deductions, including unreimbursed employee expenses and tax preparation expenses, which exceed 2% of your AGI have been eliminated.
Again, keep an eye out on legislation in the coming year—it could impact some of these Schedule A deductions which were modified or eliminated by the 2017 tax reform moves.