The Internal Revenue Service (IRS) has released its annual inflation adjustments for tax brackets and standard deductions for the 2025 tax year. These updates aim to help Americans potentially retain more of their income in the upcoming year.
Each year, the IRS adjusts the federal income tax brackets, standard deduction, and other tax provisions to mitigate “bracket creep,” which can push taxpayers into higher tax brackets as their income rises, even if their purchasing power remains the same or declines due to inflation.
While inflation adjustments are a regular IRS practice, the changes become more impactful during periods of significant inflation. This year, the IRS has adjusted tax brackets by approximately 2.75%, compared to last year’s increase of around 5.4%, reflecting the heightened inflation rate of the previous year.
These higher thresholds across various tax rates are expected to deliver savings to millions of taxpayers. Below is a summary of the IRS changes that will take effect for the 2025 tax year, impacting returns filed in 2026.
Standard Deduction:
The standard deduction, which reduces the portion of income subject to tax and is commonly claimed by the majority of taxpayers, will increase as follows:
– Single Filers: The deduction will rise by $400, reaching $15,000.
– Married Filers (Jointly): The deduction will increase by $800, reaching $30,000.
– Heads of Household: The deduction will rise to $22,500, an increase of $600.
Tax Brackets for Single Filers:
For the 2025 tax year, the IRS has adjusted the income thresholds for single filers as follows:
– 10%: Taxable income up to $11,925
– 12%: Taxable income over $11,925
– 22%: Taxable income over $48,475
– 24%: Taxable income over $103,350
– 32%: Taxable income over $197,300
– 35%: Taxable income over $250,525
– 37%: Taxable income over $626,350
Tax Brackets for Joint Filers:
For married couples filing jointly, the 2025 tax brackets are as follows:
– 10%: Taxable income up to $23,850
– 12%: Taxable income over $23,850
– 22%: Taxable income over $96,950
– 24%: Taxable income over $206,700
– 32%: Taxable income over $394,600
– 35%: Taxable income over $501,050
– 37%: Taxable income over $751,600
These updated thresholds should allow taxpayers across all income levels to benefit from lower tax rates on their adjusted income, supporting a potential increase in take-home pay.