IRS 2025 Tax Changes: Get Ready for New Rates and Deductions

Published on: November 10, 2024

As we approach the new year, it’s important to keep track of the latest tax changes for 2025.

The IRS has already announced several key updates, including new tax brackets, increases in the Earned Income Tax Credit (EITC), and new standard deduction amounts.

These changes are designed to help taxpayers keep pace with inflation and lower their tax burdens. Here’s a breakdown of the changes that will affect your 2025 tax return.

New IRS Tax Brackets for 2025

For the 2025 tax year, there are several changes to the tax brackets, which are designed to help offset the impact of inflation.

Although the system will still have seven tax brackets, the income ranges for each bracket will increase by 2.8%.

This change means that some people will pay less in taxes on their income. Here’s a look at the new tax rates and income ranges for individuals and joint filers:

Tax Rates and Ranges:

10%: Up to $11,925 (Individual), Up to $23,850 (Joint)
12%: $11,926 – $48,475 (Individual), $23,851 – $96,950 (Joint)
22%: $48,476 – $103,350 (Individual), $96,951 – $206,700 (Joint)
24%: $103,351 – $197,300 (Individual), $206,701 – $394,600 (Joint)
32%: $197,301 – $250,525 (Individual), $394,601 – $501,050 (Joint)
35%: $250,526 – $626,350 (Individual), $501,051 – $751,600 (Joint)
37%: Over $626,351 (Individual), Over $751,601 (Joint)

These updated brackets are meant to protect taxpayers from paying more taxes simply due to inflation. The highest tax rate of 37% remains the same as it was in 2024.

Standard Deduction Increase for 2025

Another important change in 2025 is the increase in the standard deduction. The standard deduction is the amount of income that is not taxed.

It makes filing taxes easier for many people because they don’t have to keep track of every little expense. Here are the new standard deduction amounts for 2025:

Individual filers: Increase of $400, bringing the total to $15,000.
Joint filers: Increase of $800, bringing the total to $30,000.
Heads of household: Increase of $600, bringing the total to $22,500.

These increases will help reduce the amount of income that is taxed, which means lower tax bills for most people.

Changes to the Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is a tax break for individuals and families with low to moderate incomes. The amount of the EITC depends on your income and family situation. Here are the new maximum amounts for the EITC in 2025:

No children: $649
One child: $4,328
Two children: $7,152
Three or more children: $8,046

These increases will provide more financial support for families and individuals who qualify for the EITC.

Why 2025 is a Pivotal Year

While these changes are helpful, 2025 will also be a pivotal year because some of the tax cuts from the Tax Cuts and Jobs Act (TCJA) of 2017 will end.

These tax cuts reduced tax rates, increased family tax credits, and eliminated some deductions. As a result, there could be some changes to tax rates and benefits starting in 2026.

The IRS has announced several important tax changes for 2025, including new tax brackets, increases in the standard deduction, and a bigger Earned Income Tax Credit.

These changes are designed to help taxpayers keep up with inflation and lower their tax bills.

However, it’s important to note that some tax cuts from the TCJA will end in 2025, which may lead to further changes in the future. Make sure to stay updated on these changes to understand how they affect your taxes.

When will the 2025 tax changes take effect?

The changes will affect your 2025 tax return, which you’ll file in 2026.

How do the new tax brackets help me?

They are adjusted for inflation, which means you may pay less in taxes on your income if your wages have increased with inflation.

What is the standard deduction?

It’s the amount of income you don’t have to pay taxes on. The new amounts for 2025 are $15,000 for individuals, $30,000 for joint filers, and $22,500 for heads of household.