IRS 2025 Tax Brackets Are Out: Will You Save Or Pay More?

The IRS (Internal Revenue Service) has revealed updated federal income tax brackets and standard deductions for the 2025 tax year.

In an announcement on Tuesday, the agency raised the income limits for each bracket, which will impact tax returns filed in 2026. For 2025, the highest tax rate of 37% will apply to individuals earning more than $626,350 and married couples filing jointly with earnings over $751,600.

Additionally, the IRS has increased various other figures, such as those related to long-term capital gains brackets, the estate and gift tax exemption, and child tax credit eligibility, among other provisions.

Annual adjustments by IRS

Each fall, the IRS announces inflation-adjusted updates to tax brackets and various other provisions for the upcoming tax year. Due to the surge in inflation during the pandemic, these adjustments have been more significant in recent years, with increases reaching 7% in 2023 and 5.4% for the current year.

The purpose of these adjustments is to shield taxpayers from “bracket creep,” a situation where individuals are pushed into higher tax brackets because of cost-of-living increases intended to counter inflation, without experiencing an actual improvement in their standard of living.

However, as U.S. inflation has now dropped to its lowest point in three years, the IRS’s annual adjustments are becoming more modest.

Federal Tax Brackets for 2025 by IRS

Federal income tax brackets determine how much tax is owed on different portions of “taxable income,” which is calculated by subtracting either the standard or itemized deductions from adjusted gross income.

37% for individual taxpayers with incomes above $626,350 ($751,600 for married couples filing jointly)
35% for incomes exceeding $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 above $11,925 ($23,850 for married couples filing jointly)
10% for incomes of $11,925 or less ($23,850 or less for married couples filing jointly)

Without congressional action, the lower tax rates introduced under former President Donald Trump will expire after 2025. If that occurs, the tax brackets will revert to their 2017 levels, with rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.

Increased Standard Deduction

The standard deduction will also rise in 2025, reaching $30,000 for married couples filing jointly, up from $29,200 in 2024. Single filers will be able to claim $15,000, an increase from $14,600.

The tax cuts introduced during Trump’s presidency also included higher standard deductions, which are set to expire after 2025 unless Congress acts to extend them.

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