With 2025 inching closer and closer, the Internal Revenue Service (IRS) is announcing all the tax updates that taxpayers will need to comply with for the next year. One of the main news announced is a higher standard deduction, which will be done to accommodate inflation. This will help taxpayers get some financial reprieve, but for those keeping score, the change is not as significant as it has been in other tax cycles.

For single filers and those married but filing separately, the standard new deduction will go up to $15,000 in 2025, which is a $400 increase from the prior year. Married couples filing jointly will see their standard deduction rise to $30,000, an $800 increase and if you’re a head of household, your standard deduction will go up by $600, rising to $22,500. All these changes are accompanied by revisions to the income thresholds for all seven federal tax brackets.

What are federal income tax brackets and how have they changed in 2025

The federal income tax bracket represents the percentage of taxes that you pay depending on your earnings or taxable income. You can calculate this number by calculating your gross income (earnings from employment, benefits, investments, properties…) and subtracting any deductions you are entitled to. This number will give you your taxable income.

Once you have determined the number, it will be divided into portions or brackets and be taxed progressively as the brackets get higher. The tax percentages for these brackets remain the same, but the amount of money that you need to earn to move to a higher tax bracket has increased to keep up with the cost-of-living increase.

The new tax rates for 2025 are:

• The 37 percent tax bracket remains unchanged and will now apply to individuals earning more than $626,350 for single taxpayers in 2025.
• The 35 percent tax bracket will now apply for incomes above $250,525 (or $501,050 for married couples filing jointly)
• The 32 percent tax bracket will now apply for incomes over $197,300 (or $394,600 for married couples filing jointly)
• The 24 percent tax bracket will now apply for those making more than $103,350 (or $206,700 for married couples filing jointly)
• The 22 percent tax bracket will now apply for incomes exceeding $48,475 (or $96,950 for married couples filing jointly)
• The 12 percent tax bracket will now apply for incomes over $11,925 (or $23,850 for married couples filing jointly)
• The 10 percent tax bracket will now apply for incomes of $11,925 or less (or $23,850 or less for married couples filing jointly)

How the IRS applies the tax brackets

The confusion most people experience when it comes to tax brackets is believing that all their income is taxed on the highest applicable tax bracket, which could not be further from the truth. This system is a bit more complicated that it would be if that were true, but it does bring fairness into the tax system, as everyone’s income is taxed the same percentages.

For someone earning above the highest income tax bracket, all percentages would apply to the different portions of their income, but for those earning just $58,000, the first $11,925 would be taxed at 10 percent, the rest of the income up to $48,475 would be taxed at 12 percent and the remaining amount would be taxed at 22 percent.

In addition to these income tax bracket modifications, the IRS has made adjustments to other tax provisions which taxpayers should be aware of. These include changes to long-term capital gains tax brackets, the estate and gift tax exemption, and the eligibility requirements for the child tax credit, among others. If you believe that you will be eligible for a specific deduction or tax credit in 2025 you should check specifically with the IRS the new requirements to qualify.

Note: Thank you for visiting our website! We strive to keep you informed with the latest updates based on expected timelines, although please note that we are not affiliated with any official bodies. Our team is committed to ensuring accuracy and transparency in our reporting, verifying all information before publication. We aim to bring you reliable news, and if you have any questions or concerns about our content, feel free to reach out to us via email. We appreciate your trust and support!