The IRS has just released the updated tax brackets applicable to the 2025 tax year. These reflect adjustments for inflation, important to taxpayers as it shows how much of an individual’s income falls into each different tax rate based on filing status and the level of income. Such adjustments are conducted in order to avoid what is called “bracket creep” when inflation pushes taxpayers into higher tax brackets, even though there has been no actual increase in real income.
2025 tax brackets overview
For the tax year of 2025, the IRS has established seven federal income tax brackets, as explained below:
- 10%: Up to $11,925 for single filers; up to $23,850 for married couples filing jointly.
- 12%: Between $11,926 and $48,475 for single filers; between $23,851 and $96,950 for married couples.
- 22%: Between $48,476 and $103,350 for single filers; between $96,951 and $206,700 for married couples.
- 24%: $103,351 – $182,100 for single filers; $206,701 – $364,200 for married couples.
- 32%: $182,101-$250,525 for single filers; $364,201 – $501,050 for married couples.
- 35%: $250,526- $578,125 for single filers; $501,051- $1 million for married couples
- 37%: above $578,126 for single filers; above $1 million for married couples.
The same thresholds are the increase of approximately 2.8% over last year brackets due to the lower inflation rates.
Effect of marginal tax rates
What these marginal tax rates mean is that one only pays a given tax rate on the portion of his income that falls within a bracket. For example:
- A single filer earning $50,000 will be taxed:
- 10% of the first $11,925,
- 12% on income ranging from $11,926 to $48,475,
- 22% on anything above that level up to his total income.
This system ensures that a taxpayer does not pay a greater percent of his or her whole income when crossing over a bracket threshold. They merely pay the higher rates on money actually inside those higher brackets.
Standard deduction changes
Hand in hand with the shifting of tax brackets, the IRS has also adjusted how much can be deducted as the standard deduction amount. For 2025:
- The standard deduction shall increase to $ 15,000 for individuals and $ 30,000 for married couples that are filing jointly. This represents about a 2.7% increase over last year
The standard deduction lowers taxable income and thus can greatly lower total tax liability. To put it in perspective, a married couple who makes 100,000 dollars could lower their taxable income down to 70,000 dollars using the standard deduction.
Capital gains tax adjustments
Besides regular income tax brackets, thresholds of capital gains tax also changed. For the year 2025:
- Long-term capital gains will be zero percent for those individuals having up to $48,350 income and married couples having up to $96,700 income.
- Those whose income is above these limits but is below $ 533,400 for single persons and $ 600,050 for married couples, charge a 15 percent capital gains tax. The Higher earners are taxed at 20%.
These changes become very important for investors since they will be able to make out when assets can be liquidated and how an investor needs to drive his investments to get maximum return after tax.
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