The Internal Revenue Service (IRS) released the new federal income tax brackets and standard deductions for the 2025 tax year on Tuesday. They also included the annual changes to account for inflation. It is important to remember that the changes, which include new tax rules, are the smallest bumps in prices in recent years.
The IRS changes the tax brackets every year to stop “bracket creep.” This is when inflation pushes people into a higher income tax band even though their real income has not gone up at the same rate.
New income tax brackets and inflation adjustments from the Internal Revenue Service (IRS)
With the new tax brackets and basic deductions, a lot of Americans will get a little more money in their paychecks and pay less in income tax. To account for rising prices, the IRS raised the mileage rate by three cents and the maximum contributions to tax-deferred retirement plans in 2025.
First, people will be able to save more for retirement because the limits on 401(k) plans will be raised. This usually means that their income tax will go down.
In the same way, remember that the new tax changes will apply to tax returns filed in 2026. The IRS has put together the following list of the new tax brackets for this year:
| Marginal rate | Individual income | Married couples filing jointly |
| 10% | $11,925 or less | $23,850 or less |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 |
| 37% | $626,351 or more | $751,601 or more |
Understanding the tax deductions that will take place this year
The standard deduction for married couples filing jointly in 2025 is $30,000. This is $800 more than the standard deduction in 2024, which was $29,200. For taxpayers who are single, the standard deduction will go up by about $400 this year, from $14,600 in 2024 to $15,000. On the other hand, heads of families will be able to deduct $22,500, which is $600 more than they could this year.
Additionally, the IRS says that the basic exclusion amount for people who die in 2025 is $13.99 million, which is more than the $13.61 million for people who die in 2024. From 2024 to 2025, the amount of gifts that are not taxed will go up from $18,000 to $19,000 per year.
What are the upcoming estate tax credits for 2025?
The IRS says that the basic exclusion amount for people who die in 2025 is $13.99 million. This is more than the $13.61 million that is allowed for people who die in 2024. In 2024, the annual exclusion for gifts was $18,000.
In January 2025, it will go up to $19,000. According to a news release from the IRS in November, Americans can now put up to $23,500 into 401(k), 403(b), and most 457 plans. This is $500 more than the $23,000 limit for 2024.
Remember that the most you can put into an IRA each year is still $7,000, the same as it was in 2024. The IRS also said that the maximum contribution to an IRA for people 50 and older will stay at $1,000 in 2025.
The maximum contribution to a 401(k) or other plan, on the other hand, is $7,500. For 2025, however, employees aged 60, 61, 62, and 63 who are enrolled in these plans can make up to $11,250 in catch-up contributions.
Inflation adjustment will result in a 2.5% increase in Social Security benefits
The Bureau of Labor Statistics (BLS) says that people who get Social Security benefits through the Retirement, Survivors, and Disability Insurance (RSDI) or Supplemental Security Income (SSI) programs will get an extra 2.5% every year to cover their costs of living and keep up with inflation.
On October 10, 2016, the BLS made the official announcement. As a result, the Social Security Administration confirmed that the new inflation adjustment will start on January 3, 2016.
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