2025 Income Tax Brackets are out: What You Need to Know

The IRS has officially announced the new 2025 income tax brackets.  Understanding these new income tax brackets is crucial for making smart financial decisions, especially with the high likelihood of taxes going up in 2026 when the Trump tax cuts expire if Congress doesn’t act. Let’s break down what’s new and how it could affect you.

2025 Income Tax Brackets

Remember in America we have a tiered system, which means you pay the percentages below that amount of income until you get to the next level, then you only pay the next tax level on that amount of income for that portion.  You aren’t “bumped” into the next tax bracket for your entire income.

 So, here’s what the brackets look like for 2025:

• 10% Bracket: For single filers, income up to $11,300 is taxed at 10%. For married couples filing jointly, this applies to income up to $22,600.
• 12% Bracket: Singles earning between $11,301 and $45,400 will see a 12% tax rate, while joint filers pay this rate on income between $22,601 and $90,800.
• 22% Bracket: Singles earning between $45,401 and $95,800, and joint filers between $90,801 and $191,600, will fall into the 22% range.
• 24% Bracket: Income between $95,801 and $182,100 for singles, and $191,601 to $364,200 for joint filers, will be taxed at 24%.
• 32%, 35%, and 37% Brackets: The highest tax rates kick in for singles earning over $182,101 and joint filers earning over $364,201. The top rate of 37% applies to incomes above $600,000 (single filers) and $1.2 million (joint filers).

2025 Standard Deductions

In addition to changes in the brackets, the IRS has also raised the standard deduction.  This means unless you have write offs totaling more than the standard deduction, this is your likely deductions for the year, giving taxpayers more potential savings:

• Single filers: The standard deduction goes up to $15,000 (up from $13,850 in 2024).
• Married couples filing jointly: The deduction rises to $30,000 (up from $27,700 in 2024).

These increases mean more income will be shielded from taxes, reducing the overall amount you will pay in overall taxes.  Don’t forget to consult with your CPA on whether you should take the standard deduction over itemizing!

2025 Capital Gains Tax

The capital gains tax is another big area to watch, especially for investors. In 2025, the rates remain mostly unchanged, but income thresholds have shifted upwards slightly:

• 0% Rate: Applies to single filers with taxable income up to $45,500 and joint filers with income up to $91,000.
• 15% Rate: Applies to single filers with income between $45,501 and $492,300, and joint filers earning between $91,001 and $553,850.
• 20% Rate: For single filers earning over $492,300 and joint filers with income over $553,850.

Don’t forget that capital gains on long-term investments are taxed at these lower rates, making it advantageous to hold assets for more than one year before selling.  Short-term gains, anything gained on investments you held less than one year pay ordinary income taxes.

What This Means for You

You should constantly stay proactive with your finances and income tax is something that we often don’t think about until it’s time to file.  These changes can influence your tax strategy—especially if your income is near a bracket cutoff. It’s a great time to revisit your tax plan, maximize deductions, and explore ways to reduce your taxable income, such as contributing to retirement accounts.  With the Trump tax cuts expiring, it may also be the last year to take big advantage of the lower tax brackets for things like converting pre-tax retirement accounts into ROTH accounts that grow tax free!

Our advice? Don’t wait! Schedule time with a financial advisor or tax professional to ensure you’re taking full advantage of every opportunity. Smart planning today can mean more savings when you file your 2025 taxes.

Source of above numbers: IRS releases tax inflation adjustments for tax year 2025