Finance Forward Blog
The Updated Tax Brackets for 2025
The Updated Tax Brackets for 2025
Each year, the IRS adjusts tax brackets to account for inflation, ensuring that taxpayers aren't pushed into higher brackets due to rising costs of living. In this blog, we’ll break down the updated tax brackets for 2025, highlight key changes from 2024, and explain how these adjustments may impact you.
What Are Tax Brackets?
Tax brackets determine the rate at which your income is taxed. The U.S. uses a progressive tax system, meaning that different portions of your income are taxed at different rates. For example, if you earn $100,000 annually, only a portion of your income falls into the highest tax bracket—most of it is taxed at lower rates. See the example below.
Every year, the IRS adjusts these brackets based on inflation data from the Consumer Price Index (CPI). These adjustments aim to prevent "bracket creep," where inflation pushes taxpayers into higher tax brackets even though their purchasing power remains the same.
2025 Federal Income Tax Brackets
Here’s a breakdown of the new federal income tax brackets for 2025:
Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 |
22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 |
24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 |
35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 |
37% | $626,351 or more | $751,601 or more | $626,351 or more |
Source: IRS
Key Changes from 2024
Compared to 2024:
Higher Thresholds: Each bracket's income threshold has increased slightly. For example, in 2024 the top tax rate (37%) applied to single filers earning over $578,125; in 2025 this threshold remains unchanged but reflects inflationary adjustments.
- Standard Deduction Increase: The standard deduction has also been adjusted:
Single filers: Increased from $14,600 in 2024 to approximately $15,000 in 2025.
Married filing jointly: Increased from $29,200 in 2024 to approximately $30,000 in 2025.
How Do Inflation Adjustments Impact You?
Inflation adjustments can have several effects on taxpayers:
Reduced Tax Liability: If your income has remained steady compared to last year but thresholds have risen due to inflation adjustments, you may pay less in taxes.
Higher Standard Deduction: A larger standard deduction means more of your income is shielded from taxation.
Bracket Creep Prevention: Inflation adjustments prevent middle-income earners from being pushed into higher tax brackets unnecessarily.
For example:
A single filer earning $50,000 annually would have paid taxes at a marginal rate of 22% on part of their income in 2024. In 2025 with adjusted thresholds for inflation, more of their income may fall into the lower bracket (12%), reducing their overall tax burden.
What Should You Do Next?
To make the most of these updates:
Review your withholding amounts with your employer or payroll provider to ensure they align with the new thresholds.
Consult with a tax professional or accountant (like us!) to strategize ways to maximize deductions and minimize liability.
Plan ahead for major life events—such as marriage or having a child—that may change your filing status or eligibility for credits.
Final Thoughts
The updated tax brackets for 2025 reflect necessary adjustments due to inflation and aim to provide relief for taxpayers across all income levels.
We are no longer taking clients for tax year 2024 filings, but you can reach out to us closer to October 2025 to get on our books for next year. Proposals are typically sent out in November.