On Tuesday, the IRS announced inflation adjustments for the 2025 tax year, which could boost Americans’ take-home pay next year. Each year, the IRS updates tax brackets and standard deductions to prevent “bracket creep,” where taxpayers face higher rates due to income increases without a real rise in purchasing power caused by inflation.
For 2025, tax brackets will rise by approximately 2.75%, a decrease from last year’s 5.4% adjustment, reflecting the ongoing high inflation levels. These new higher thresholds for tax rates may lead to savings for millions across various income brackets. These changes will apply to tax returns filed in 2026.
If you’re a single taxpayer and earn more than $626,350, you will pay a tax rate of 37%. For married couples filing jointly, this rate applies if their income exceeds $751,600.
The 35% tax rate applies to individual taxpayers with incomes over $250,525 and married couples filing jointly with incomes over $501,050.
A 32% tax rate is for those with incomes over $197,300 ($394,600 for married couples filing jointly).
If your income is over $103,350 as a single filer, you will pay 24%. For married couples filing jointly, this rate applies if their income exceeds $206,700.
The 22% tax rate applies to single taxpayers earning over $48,475 ($96,950 for married couples filing jointly).
If you earn more than $11,925 as a single taxpayer, you’ll pay a 12% tax rate. For married couples filing jointly, this rate applies to incomes over $23,850.
Lastly, if your income is $11,925 or less (or $23,850 or less for married couples filing jointly), you will be taxed at a rate of 10%.
The IRS has also raised thresholds for various tax deductions and credits for the 2025 tax year to adjust for inflation. The Earned Income Tax Credit (EITC) will increase to $8,046 for qualifying taxpayers with three or more children, up from $7,830 in 2024.
The alternative minimum tax exemption amounts are now $88,100 for individuals, phasing out at $626,350 for unmarried individuals. For married couples filing jointly, the exemption is $137,000, phasing out at $1,252,700.
Additionally, workers can contribute an extra $100 to health flexible spending accounts, raising the contribution limit to $3,300. The minimum carryover amount for unused funds will increase to $660.
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