The Internal Revenue Service has finalized the tax brackets for the 2025 filing year, adjusting thresholds in line with inflation. While the tax rates remain unchanged, several deductions and credits are seeing notable shifts that may affect many taxpayers.
The IRS updates its tax framework annually to reflect cost-of-living increases, and the 2025 adjustments are no exception. Americans will enter the new tax year under slightly revised rules for income brackets, standard deductions, and credits, all of which may influence how much individuals and families owe, or save, next April.
While the tax rate percentages are holding steady, income thresholds within each bracket have been pushed upward. This shift may provide minor relief for some earners, allowing a greater portion of income to be taxed at lower rates. These changes come amid broader adjustments to deductions and benefits enacted by recent legislation, which solidified several elements of previous tax reform laws.
Adjusted Income Thresholds Reflect Inflation-Driven Updates
The seven federal income tax brackets, 10%, 12%, 22%, 24%, 32%, 35%, and 37%, remain in place for the 2025 tax year. However, according to the IRS, income thresholds for each bracket have been revised to account for inflation. For single filers, the 37% top tax rate now applies to income over $626,350, while married couples filing jointly will see the same rate apply to earnings above $751,600.
Other brackets have also shifted: the 35% rate begins at $250,525 for single filers and $501,050 for joint filers. The 32% bracket starts at $197,300 for individuals and $394,600 for couples. Taxpayers in the 24% range will see the threshold kick in at $103,350 ($206,700 jointly). The 22% rate applies to income above $48,475 ($96,950 jointly), and the 12% rate starts at $11,925 ($23,850 for married couples). All income below that remains under the 10% bracket.
According to U.S. Bank, the IRS adjusts over 60 tax provisions each year to align with cost-of-living measures. For 2025, the overall increase in thresholds averaged around 2.8%. This means taxpayers may remain in a lower bracket than they would have under previous thresholds, despite small increases in their income.
New Deductions and Credits Reshape Tax Planning
In addition to bracket adjustments, the IRS also raised the standard deduction across all filing statuses. As stated by silive.com, for 2025, married couples filing jointly can now deduct $32,200, while single filers are allowed $16,100, and heads of household may claim $24,150.
A significant development for older adults is the introduction of a temporary bonus deduction. According to U.S. Bank, individuals aged 65 and older may now claim an additional $6,000 if filing singly or $12,000 if married and filing jointly, provided their income remains below certain thresholds. This bonus is part of a broader effort to provide targeted tax relief to retirees on fixed incomes and is available through 2028.
Tax credits have also seen changes. The child tax credit has been increased to $2,200 per qualifying child, up from previous levels, with partial refunds of up to $1,700 possible for eligible taxpayers. However, phaseouts apply: single filers earning over $200,000 and couples earning over $400,000 will see a reduction in credit value, according to U.S. Bank.
For those with investment income, the long-term capital gains tax brackets remain, with a 0% rate applying to married couples earning under $96,700. Meanwhile, the Net Investment Income Tax still imposes a 3.8% tax on higher earners whose modified adjusted gross income exceeds $250,000.
These updates highlight a continuing trend of aligning federal tax structures with broader economic shifts. While the core rates stay the same, the landscape of deductions and credits will require close review from individuals and advisors alike to optimize returns and avoid surprises.
