JACKSONVILLE, Fla. – The IRS has announced new federal income tax brackets and standard deductions. A 2.7% inflation-related adjustment will apply starting in 2025.
RELATED|IRS announces pension and retirement plan contribution adjustments for 2025
The adjustments from the IRS mean you won‘t be saddled with a higher tax bill because of rising inflation.
In 2024, the tax bracket threshold increased by 5.4% to account for inflation. A record was set in 2023 at 7.1%.
Thomas Cryan, a local attorney and the author of “Disrupting Taxes,” explained that the adjustments don’t mean you can look forward to a bigger tax refund but it still benefits taxpayers.
“Under the inflation adjustment, as your salary gets pushed down, you pay less taxes,” Cryan said. “This adjustment allows you to push 3% of your salary into the lower tax brackets. They actually pay less taxes as a byproduct of it.”
Single taxpayers and married people filing separately will be able to access a standard deduction of $15,000 in 2025. It’s an increased benefit of $400 compared to the previous year.
The number goes up to $30,000 for married couples filing jointly, marking an increase of $800. For heads of household, the standard deduction will be $22,500, up $600 from 2024.
As for the seven tax brackets, the lowest tax bracket is 10%, the middle tax bracket is 24% -and the highest tax bracket is 37% for 2025.
Your annual income and whether you file jointly will determine what bracket you fall in.
- 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)
These new figures would apply when you file your 2025 federal income tax return in 2026.
With the presidential election looming, Cryan said it’s still unclear how the candidate’s tax plans would change things. He notes that the Tax Cut and Jobs Act of 2017 expires at the end of 2025.
“The new Congress, and whoever’s in the White House and whoever controls Congress, regardless of what happens in the election, they will have to deal with passing new tax legislation,” Cryan said.