As if the U.S. tax code wasn’t confusing enough, there are some changes in store for the 2025 tax season. Specifically, tax brackets are shifting, which might impact what you owe Uncle Sam.
On Oct. 22, the IRS announced the new tax brackets for 2025. Knowing how taxes are changing can help you prepare yourself financially for what might be ahead.
Here are the new tax brackets and how they might impact you.
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1. 2025’s new tax brackets
Here are the new tax brackets for 2025:
2025 tax bracket for those married filing jointly (and surviving spouses):
- 10% — $0 to $23,850
- 12% — $23,850 to $96,950
- 22% — $96,950 to $206,700
- 24% — $206,700 to $394,600
- 32% — $394,600 to $501,050
- 35% — $501,050 to $751,600
- 37% — Greater than $751,600
2025 tax bracket for single filers
- 10% — $0 to $11,925
- 12% — $11,925 to $48,475
- 22% — $48,475 to $103,350
- 24% — $103,350 to $197,300
- 32% — $197,300 to $250,525
- 35% — $250,525 to $626,350
- 37% — Greater than $626,350
Income tax brackets are adjusted annually to account for inflation. These adjustments help ensure taxpayers don’t end up in higher tax brackets solely due to rising inflation. That helps maintain fairness in the tax system.
The standard deduction is also being tweaked in the following ways:
- Married filing jointly and surviving spouses — $30,000 (up from $29,200 in 2024)
- Heads of household — $22,500 (up from $21,900)
- Everyone else — $15,000 (up from $14,600)
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The IRS also announced some other tax rates that will shift in 2025.
For example, the alternative minimum tax exemption amount for unmarried individuals will increase to $88,100 or $68,650 for married individuals filing separately. The exemption starts phasing out at $626,350.
Married couples filing jointly will find that the alternative minimum tax exemption amount rises to $137,000. The phase-out begins at $1,252,700.
The earned income tax credit amount for taxpayers with three or more qualifying children is jumping to $8,046, a rise from $7,830 in 2024.
If you participate in a health flexible spending cafeteria plan, the dollar limitation for employee salary reductions is rising to $3,300, a $100 increase over 2024.
The annual exclusion for gifts also will increase from $18,000 to $19,000.
Other rates are also being adjusted. For more information, visit the IRS website or consult with your tax professional.
3. What do higher tax brackets mean for you?
The good news is that some taxpayers could see a smaller tax bill as tax brackets adjust higher. A larger standard deduction also should help lower tax bills for some.
Many taxpayers also are likely to get a bigger benefit from specific tax deductions for which they qualify.
However, any relief might be more modest than in recent years. In September, Bloomberg Tax & Accounting projected this year's tax bracket changes, and today's announcement shows that the firm was spot-on in its predictions, getting all of them correct.
In its projection, Bloomberg noted that such changes are equivalent to a 2.8% adjustment in the brackets, well below the 5.4% in 2024 and 7.1% in 2023.
Of course, this year's lower adjustment is actually a cause for celebration, as it means inflation has finally cooled significantly.
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4. Which additional 2025 changes might help you cut tax bills?
Earlier this year, the IRS announced that in 2025, taxpayers with a health savings account (HSA) can contribute $4,300 for an individual or $8,550 for a family. Those amounts are up from $4,150 and $8,300, respectively, in 2024.
Contribution limits for 401(k) plans and IRAs are expected to be announced soon and might also increase modestly.
Making contributions to these types of accounts can save you on taxes both in 2025 and into the future.
Bottom line
Tax brackets will not change much for the 2025 season. A lot of that is due to cooling inflation in 2024.
Still, the changes create opportunities to make money moves that will improve your bottom line. If you are lucky, you might even see a reduced tax bill.
If you have questions about these changes and how to take advantage of them, consult a tax professional.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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