The IRS recently unveiled the new federal income tax brackets for 2025, adjusting income thresholds across all tax rates. These changes, including increases to the standard deduction, aim to account for inflation and provide relief for many taxpayers.
Read the full IRS announcement here.
Key Changes to 2025 Tax Brackets
The 2025 adjustments raise the thresholds for all income tax brackets:
- 37% for singles earning over $636,350 and couples earning over $751,600 (up from $609,350 and $731,200).
- 35% for singles earning over $250,525 and couples earning over $501,050 (up from $243,725 and $487,450).
- 32% for singles earning over $197,300 and couples earning over $394,600 (up from $191,950 and $383,900).
- 24% for singles earning over $103,350 and couples earning over $206,700 (up from $100,525 and $201,050).
- 22% for singles earning over $48,475 and couples earning over $96,950 (up from $47,150 and $94,300).
- 12% for singles earning over $11,925 and couples earning over $23,850 (up from $11,600 and $23,200).
- 10% for singles earning $11,925 or less and couples earning $23,850 or less (up from $11,600 and $23,200).
Increased Standard Deductions
The IRS also raised the standard deduction:
- $15,000 for single filers (up by $400).
- $30,000 for married couples filing jointly (up by $800).
These changes, effective for the 2025 tax year, will appear on returns filed in 2026.
Additional IRS Adjustments to 2025 Tax Brackets
Beyond tax brackets, the IRS has announced updates to other tax-related provisions:
- Alternative Minimum Tax: Exemption starts at $88,100 for singles (up from $85,700) and $137,000 for married couples filing jointly (up from $133,300).
- Earned Income Tax Credit: Maximum credit for taxpayers with three or more children increases to $8,046 (up from $7,830).
- Transportation Fringe Benefit: Monthly commuter benefit limit rises to $325 (up by $10).
- Health Flexible Spending Plans: Contribution limit increases to $3,300 (up by $100).
Updates to Medical Savings Accounts
Changes to medical savings accounts (MSAs) include:
- Self-only coverage: Annual deductible range increases to $2,850–$4,300, and maximum out-of-pocket rises to $5,700.
- Family coverage: Deductible range increases to $5,700–$8,550, with a maximum out-of-pocket of $10,500.
Other Notable Adjustments
The IRS is also increasing:
- Foreign earned income exclusion to $130,000.
- Basic estate exclusion amount to $13,990,000.
- Annual gift tax exclusion to $19,000.
- Adoption credit for special needs children to $17,280.
How the 2025 Tax Brackets Impact Taxpayers
These inflation-driven adjustments aim to prevent taxpayers from being pushed into higher brackets due to cost-of-living increases. As Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, noted, “Taxpayers with the same income in 2025 as in 2024 will see their taxes lowered due to expanded tax rate brackets, a higher standard deduction, and other inflation-adjusted provisions.”
Staying informed about these updates can help you better plan your finances for the year ahead.
Regardless of your bracket, make sure you pay your taxes!
While knowing your tax rate is important, it's even more important to always pay your taxes, whichever tax bracket you're in. If you've missed any payments, or have any other tax issues going on, definitely reach out to us to help you make things right. My team and I are always here to help!
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