The IRS has officially announced the federal income tax brackets and updated deductions for 2025, bringing changes that could impact your tax bill. These updates include inflation adjustments and higher standard deductions, which means some taxpayers could see lower taxable income. Here’s a breakdown of the changes and how they may affect you.
New Federal Tax Brackets for 2025
The top tax rate will remain at 37%, but inflation adjustments have raised the income thresholds across all brackets, which could save you money depending on your earnings.
Here’s a look at the updated tax brackets for single filers and married couples filing jointly:
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
These changes mean taxpayers who receive raises in 2025 may avoid being pushed into a higher tax bracket due to inflation, thanks to the adjusted income thresholds.
Standard Deduction Increases for 2025
The IRS is also raising the standard deduction, offering tax relief for many households.
- Single Filers and Married Individuals Filing Separately: $15,000 (up from $14,600)
- Married Couples Filing Jointly: $30,000 (up from $29,200)
- Heads of Household: $22,500 (up from $21,900)
The higher standard deduction may lead more taxpayers to take the standard deduction rather than itemizing, simplifying the filing process while potentially lowering taxable income.
Why Are These Changes Important?
The IRS adjusts tax brackets and deductions annually to account for inflation, helping taxpayers avoid “bracket creep,” which occurs when income increases push them into higher tax brackets even though their purchasing power remains the same.
For high earners, the top marginal tax rate of 37% will apply to incomes over $626,350 for single filers and $751,600 for married couples filing jointly. Taxpayers who exceed these thresholds could face significant withholding unless they adjust their tax planning strategies.
What Should Taxpayers Do Next?
- Review your tax withholding: Withholding too little could result in a large tax bill, while over-withholding could mean you’re giving the IRS an interest-free loan.
- Consider tax credits and deductions: Make sure you’re maximizing available credits, like the Child Tax Credit or Earned Income Tax Credit.
- Consult a tax advisor: With the new brackets and higher deductions, it’s a good time to evaluate your tax plan to avoid surprises when filing your 2025 return.
