IRS Announces New Tax Brackets for 2025 and Social Security COLA – How They Will Affect New York Residents

The full list of money changes the federal government will make in the new year is now public. The Social Security Administration (SSA) finally released the long-awaited cost-of-living adjustment. At the same time, the Internal Revenue Service (IRS) changed the tax rates and other payments.

IRS changes to tax income brackets

The changes made by the IRS are not major overhauls of the system. For example, the top tax rate of 37% will stay the same. This rate applies to single people making more than $626,350 a year and married couples making more than $751,600 a year. There will be the same number of these as there were in 2024.

But, as News10 reported, there have been some changes to the tax rates to account for the falling value of money and the rising cost of living:

Taxable Income Range	Tax Calculation
Under $23,850	10%
$23,850 to $96,950	$2,385 plus 12% of the excess over $23,850
$96,950 to $206,700	$11,157 plus 22% of the excess over $96,950
$206,700 to $394,600	$35,302 plus 24% of the excess over $206,700
$394,600 to $501,050	$80,398 plus 32% of the excess over $394,600
$501,050 to $751,600	$114,462 plus 35% of the excess over $501,050
Over $751,600	$202,154.50 plus 37% of the excess over $751,600

Taxable Income Range	Tax Calculation
Under $11,925	10%
$11,925 to $48,475	$1,192.50 plus 12% of the excess over $11,925
$48,475 to $103,350	$5,578.50 plus 22% of the excess over $48,475
$103,350 to $197,300	$17,651 plus 24% of the excess over $103,350
$197,300 to $250,525	$40,199 plus 32% of the excess over $197,300
$250,525 to $626,350	$57,231 plus 35% of the excess over $250,525
Over $626,350	$188,769.75 plus 37% of the excess over $626,350

Using these formulas on a real-life example, the typical household income in New York in 2022 was $81,386. If we use that as the taxable income for a couple filing jointly, they would have to pay $9,289 in federal taxes.

This is because the method for figuring out your federal income tax gives you different rates for different parts of your taxable income. Not all income is taxed; people can deduct certain amounts of their income (either in a normal or itemized way). The taxed income is the amount that is left over after the deductions are taken out.

This year, the standard deduction for single people and married people filing separately will go up to $15,000, which is $400 more than the previous year. For married couples filing equally, the standard deduction will go up by $800, to $30,000.

The Earned Income Tax Credit is another thing that the IRS has changed. Based on information the service gave, the credit will be given in the way shown below:

	No qualifying children	1 qualifying child	2 qualifying children	3+ qualifying children
Earned income	$8,490	$12,730	$17,880	$17,880
Maximum credit	$649	$4,328	$7,152	$8,046
Threshold phaseout  (Married filing jointly)	$17,730	$30,470	$30,470	$30,470
Completed phaseout  (Married filing jointly)	$26,214	$57,554	$64,430	$68,675
Threshold phaseout  (Other filers)	$10,620	$23,350	$23,350	$23,350
Completed phaseout  (Other filers)	$19,104	$50,434	$57,310	$61,555

In 2025, the Alternative Minimum Tax (AMT) exclusions will also grow. Single filers will get an exemption of $88,100, and married couples filing jointly will get $137,000. These exemptions will start to go away at $626,350 for single filers and $1,252,700 for married couples filing jointly.

One last change: the yearly gift limit is going up to $19,000, and the most you can get in adoption credits is $17,280. The $130,000 limit on foreign-earned income will be raised, and the $13.9 million limit on death taxes will also be raised.

The changes to Social Security

Most of these changes are caused by the 2.5 percent rise in the cost of living that was reported in October based on inflation data from the third trimester of the year. This amount will be added to benefits like Social Security, Supplemental Security Income (SSI), Disability payments, and more.

But there are some changes that this number won’t tell you about. The highest amount of money that is taxed for Social Security will go up by $7,500, to $176,100. The earnings cap for people under full retirement age will go up to $23,400, and for people who reach full retirement age in 2025, it will go up from $59,520 to $62,160.

Another thing that won’t change is the amount of taxes taken out of workers’ paychecks for Social Security. It will stay at 7.65% and 15.3% for self-employed people.

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