The Internal Revenue Service (IRS) announced on Tuesday new inflation-adjusted tax brackets for 2025. The IRS also revealed an increase in the standard deduction to $15,000 for single filers and $30,000 for married couples.
These changes will apply to income earned in 2025 and reported on tax returns filed in 2026. While the marginal tax rates of the new tax brackets remain unchanged, the income thresholds at which these rates take effect have shifted.
New Tax Brackets 2025
Here are the new tax brackets for 2025, according to the IRS:
- 37% for incomes over $626,350 ($751,600 for married couples filing jointly)
- 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
- 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
- 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
- 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
- 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
- 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
The highest marginal rate of 37% will now apply to income exceeding $626,350 for single taxpayers. For couples filing joint returns, the top income threshold is $751,600. This reflects an increase of about 2.8% from the 2024 figures.
These annual inflation adjustments are notably smaller than the 5.4% increase in 2024 and the 7% increase in 2023. Recent years of high inflation prompted more significant adjustments to shield a greater portion of income from taxes. But with inflation cooling, the increase this year is more modest.
Other Tax Benefits Adjusted For Inflation
Additionally, the IRS announced higher limits for several other tax-related benefits for 2025. These include the earned-income tax credit, adoption credit, and health savings account contributions. The allowable nontaxable gift amount will also rise to $19,000 in 2025, up by $1,000 from this year.
This announcement marks the final year under the tax brackets set by the 2017 Tax Cuts and Jobs Act. Without congressional action, the marginal tax rates in 2026 will revert to previous levels. This would cause the top rate set to increase to back to 39.6%.
Former President Donald Trump has pledged to extend the tax cuts, a key achievement of his first term, if he wins another term. On the other hand, Vice President Kamala Harris has indicated she would allow some of the cuts to expire. But, she has also promised not to raise taxes on households earning less than $400,000 annually.
Need Help Filing Your Business and Personal Taxes?
Need help determining your filing status, calculating your taxable income, or preparing and filing your tax returns? Boxelder’s accounting team is here to help. Schedule a meeting with a licensed Boxelder CPA toady and we’ll get you ready for tax season 2025.
