Taxes are set every year, and it is rare that the Internal Revenue Service (IRS) does not make any adjustment to some of the most common payments Americans have to make every year. One of the most anticipated tax modifications is the inflation adjustments to tax brackets and deductions.
The decision to modify the tax brackets is good for most taxpayers as it prevents what is known as the “bracket creep”. The “bracket creep” is a phenomenon that occurs when taxpayers are pushed into higher tax brackets due to increasing income despite their purchasing power being unchanged or reduced because of high inflation. Modifying the tax brackets to account for these increases keeps taxes more balanced and fair, especially when it comes to periods of high inflation that strain families’ finances.
The tax bracket adjustment could help families save a bit of their money in taxes and apply those savings to their day to day expenses, especially in areas of the country where the cost of living has not risen as insidiously.
How have the tax brackets been adjusted for 2025
In response to the inflation data for this year, the IRS is shifting brackets higher by about 2.75%. While this may seem high, it is nothing compared to the 2024 adjustment, which was around 5.4% and which was still a reflection of the aftermath of the COVID 19 pandemic on the state of the economy.
The changes for the taxes in 2025 (which will be applied to the returns filed in 2026) are:
Standard deduction
The standard deduction is a dollar amount that reduces your taxable income. It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A. The standard deduction is higher for taxpayers who are 65 or older or are blind.
This standard deduction can be swapped for an itemized deduction if the taxpayer thinks it will be higher. Some taxpayers must itemize their deduction, in the following cases
- Your filing status is married filing separately, and your spouse itemizes deductions on their return;
- You are filing a tax return for a short tax year because of a change in your annual accounting period; or
- You are a nonresident or dual-status alien during the year. You are considered a dual-status alien if you were both a nonresident and resident alien during the year.
Usually, it is better for taxpayers to adhere to the standard reduction, which in 2025 will increase to $15,000 for single taxpayers and to $30,000 for married taxpayers who file returns jointly. Heads of households will have a standard deduction of $22,500.
New IRS tax brackets for 2025
Since we have stated that the IRS will increase its tax brackets by about 2.75% for both individual and married filers across various income levels in tax year 2025, it is important to know how this translates to the real taxable income. Just remember that each portion of your income is taxed separately and that it is not all taxed by the highest tax bracket, which is a common misconception.
New tax brackets for 2025
| Percentage | Single filer | Joint Filer |
| 10% | Taxable income up to $11,925 | Taxable income up to $23,850 |
| 12% | 12%: Taxable income over $11,925 | 12%: Taxable income over $23,850 |
| 22% | 22%: Taxable income over $48,475 | 22%: Taxable income over $96,950 |
| 24% | 24%: Taxable income over $103,350 | 24%: Taxable income over $206,700 |
| 32% | 32%: Taxable income over $197,300 | 32%: Taxable income over $394,600 |
| 35% | 35%: Taxable income over $250,525 | 35%: Taxable income over $501,050 |
| 37% | 37%: Taxable income over $626,350 | 37%: Taxable income over $751,600 |
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