The Internal Revenue Service (IRS) has officially released its new tax brackets for 2025, adjusting income thresholds to account for inflation. This change is designed to prevent “bracket creep,” where rising wages push taxpayers into higher tax brackets without an actual increase in purchasing power.
If you’re wondering what this means for your wallet, the short answer is: You could end up paying less in taxes or at least avoid paying more than necessary.
New Federal Tax Brackets for 2025
While the seven tax rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—remain unchanged, the income ranges have been increased to reflect inflation. Here’s how the new tax brackets look:
For Single Filers:
- 10%: Up to $11,925
- 12%: $11,926 to $48,475
- 22%: $48,476 to $103,350
- 24%: $103,351 to $197,300
- 32%: $197,301 to $250,525
- 35%: $250,526 to $626,350
- 37%: Over $626,350
For Married Couples Filing Jointly:
- 10%: Up to $23,850
- 12%: $23,851 to $96,950
- 22%: $96,951 to $206,700
- 24%: $206,701 to $394,600
- 32%: $394,601 to $501,050
- 35%: $501,051 to $751,600
- 37%: Over $751,600
For Heads of Household:
- 10%: Up to $17,000
- 12%: $17,001 to $64,850
- 22%: $64,851 to $103,350
- 24%: $103,351 to $197,300
- 32%: $197,301 to $250,500
- 35%: $250,501 to $626,350
- 37%: Over $626,350
How This Helps You
The IRS makes these annual adjustments to help taxpayers keep more of their hard-earned money. Since the income limits for each tax bracket have increased, more of your income will now be taxed at lower rates. This means you could owe less in federal taxes, especially if your salary has remained the same or only increased slightly.
For example, if you made $50,000 in 2024, part of your income may have been taxed at the 22% rate. In 2025, more of that income will fall under the 12% bracket, reducing the amount you owe.
Additionally, the standard deduction is also expected to increase, further lowering taxable income for many Americans.
What Should You Do Next?
- Check Your Tax Withholding: If you usually get a big refund or owe a lot at tax time, it might be a good idea to update your W-4 with your employer.
- Plan for Retirement Contributions: With lower taxable income, consider contributing more to tax-advantaged accounts like a 401(k) or IRA.
- Speak with a Tax Professional: If you have a more complex financial situation, consulting a tax expert can help you maximize deductions and credits.
Overall, the new tax bracket adjustments mean potential savings for millions of Americans. With careful planning, you can take advantage of these changes to keep more money in your pocket in 2025.
