The Internal Revenue Service (IRS) announced tax adjustments for 2025, including new tax brackets, Earned Income Tax Credit (EITC) amounts and new standard deductions, so catching up on time should be easy.
The rules announced apply for the 2025 tax period and thus the results will be seen on 2026 tax returns, the next tax season which will run from January through April 2025 applies for the 2024 tax period and those rules have already been in place for a year.
The most important change coming for the 2025 tax period is an adjustment to the tax brackets. These adjustments are made to offset inflation and prevent taxpayers from paying more tax when their wages keep pace with inflation, but they do not receive a significant wage increase.
What are the new IRS tax brackets for 2025?
The overall system will remain the same, with seven tax brackets and the highest tax bracket remaining at 37%. The remaining tax brackets have been adjusted by 2.8% to compensate for inflation, which benefits some taxpayers by allowing more of their income to be taxed at lower rates. The new tax rates and ranges are as follows:
- Tax / Rate, Individual Income Range, Income Range for Joint Filers
- Tax / Rate: 10% | Individual income bracket: Up to $11,925 | Income bracket for joint filers: Up to $23,850
- Tax / Rate: 12% | Individual income range: $11,926 – $48,475 | Joint filer income range: $23,851 – $96,950
- Tax / Rate: 22% | Individual income range: $48,476 – $103,350 | Income range for joint filers: $96,951 – $206,700
- Tax / Rate: 24% | Range of individual income: $103,351 – $197,300 | Range of income for joint filers: $206,701 – $394,600
- Tax / Rate: 32% | Individual income range: $197,301 – $250,525 | Joint filer income range: $394,601 – $501,050
- Tax / Rate: 35% | Range of individual income: $250,526 – $626,350 | Range of income for joint filers: $501,051 – $751,600
- Tax / Rate: 37% | Individual Income Range: More than $626,351 | Income Range for joint filers: Over $751,601
- As we have explained, the 37% tax rate is the only one that remains unchanged as of 2024.
Increase in the standard deduction for the year 2025
Another change that has been implemented is an increase in the standard deduction. Deductions reduce the amount of taxable income taxpayers must pay, but they fall into two categories: itemized deduction and standard deduction.
Itemized deductions will not change, as they are filed individually and for a specific amount of money that changes from year to year, but since the standard deduction is intended to simplify filing, it is the same for everyone and should keep up with inflation. The new standard deductions will be:
- Single filers: will see a $400 increase to $15,000.
- Joint filers: will see an increase of $800, reaching $30,000.
- Heads of Household: will see an increase of $600, reaching $22,500.
- Changes to the Earned Income Tax Credit (EITC)
The EITC helps low- to moderate-income workers and families get tax relief. Although it is higher for families with children, it is not necessary to have offspring to qualify for it. The new amounts are:
- Eligible taxpayers with no children: maximum credit of $649.
- Eligible taxpayers with one child: maximum credit of $4,328.
- Eligible taxpayers with two children: maximum credit of $7,152.
- Eligible taxpayers with three or more children: maximum credit of $8,046.