The IRS has updated the tax brackets for 2025, introducing a 2.8% increase in income thresholds from the previous year. These annual adjustments, while lower than those of recent years, aim to shield taxpayers from “bracket creep,” where inflation, not actual income growth, pushes individuals into higher tax brackets.
Here’s a breakdown of the new 2025 tax brackets, standard deductions, capital gains limits, and estate tax thresholds, along with insights on how these updates can impact your finances.
2025 Federal Income Tax Brackets
The IRS adjusts federal income tax brackets annually to account for inflation. For 2025, here’s what single filers and married couples filing jointly can expect:
New 2025 Tax Brackets for Single Filers and Married Couples Filing Jointly
| Tax Rate | Taxable Income (Single) | Taxable Income (Married Filing Jointly) |
|---|---|---|
| 10% | Up to $11,925 | Up to $23,850 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 |
| 37% | Over $626,350 | Over $751,600 |
New 2025 Tax Brackets for Married Couples Filing Separately and Heads of Household
| Tax Rate | Taxable Income (Married Filing Separately) | Taxable Income (Head of Household) |
|---|---|---|
| 10% | Up to $11,925 | Up to $17,000 |
| 12% | $11,925 – $48,475 | $17,000 – $64,850 |
| 22% | $48,475 – $103,350 | $64,850 – $103,350 |
| 24% | $103,350 – $197,300 | $103,350 – $197,300 |
| 32% | $197,300 – $250,525 | $197,300 – $250,500 |
| 35% | $250,525 – $375,800 | $250,500 – $626,350 |
| 37% | Over $375,800 | Over $626,350 |
How Tax Brackets Work
Tax brackets apply different rates to portions of income rather than taxing the entire income at the highest rate.
For example, a married couple earning $100,000 in taxable income in 2025 would pay 10% on the first $23,850, 12% on income from $23,850 to $96,950, and 22% on income above that. This system ensures fairness by taxing only the income that falls within each bracket.
Standard Deduction Increase for 2025
The standard deduction will increase slightly in 2025, providing additional tax relief:
- Married Couples Filing Jointly: $30,000, up from $29,200.
- Single Filers and Married Filing Separately: $15,000, up from $14,600.
- Head of Household: $22,500, up from $22,000.
For example, a married couple with $100,000 in income would be able to reduce their taxable income to $70,000, thanks to the standard deduction. Since most taxpayers use the standard deduction over itemizing, this adjustment is a significant benefit.
Capital Gains Tax Brackets for 2025
For 2025, capital gains tax brackets have also been adjusted, benefiting low- and middle-income taxpayers who may qualify for the 0% tax rate on capital gains if their income falls below specific thresholds:
| Capital Gains Rate | Single Filers Income | Married Filing Jointly Income |
|---|---|---|
| 0% | Up to $48,350 | Up to $96,700 |
| 15% | $48,350 – $533,400 | $96,700 – $600,050 |
| 20% | Over $533,400 | Over $600,050 |
These changes mean that taxpayers with modest incomes can benefit from a 0% capital gains rate on their investments, with those earning higher amounts still eligible for the 15% rate, up to the thresholds shown.
Estate Tax and Gift Tax Adjustments for 2025
The IRS has also updated the estate tax and gift tax limits:
- Estate Tax Exemption: $13.99 million, up from $13.61 million in 2024.
- Annual Gift Tax Exclusion: Individuals can gift up to $19,000 per recipient tax-free, increased from $18,000.
These adjustments mean that high-net-worth individuals can leave a larger amount of wealth to heirs tax-free, and give more tax-free gifts to family and friends each year.
Key Takeaways on the 2025 IRS Tax Changes
The updated tax brackets and standard deductions for 2025 offer relief against “bracket creep,” ensuring that rising inflation doesn’t disproportionately increase tax burdens. Here’s how these changes can benefit taxpayers:
- Higher Income Thresholds: Adjusted brackets mean that modest income increases are less likely to push individuals into higher tax rates.
- Increased Standard Deduction: More taxpayers will likely choose the standard deduction, simplifying tax filings and lowering taxable income.
- Capital Gains Adjustments: Low- and middle-income earners can pay a lower rate on investment income, boosting post-tax returns.
- Enhanced Estate and Gift Tax Limits: Higher exemption limits allow more assets to pass to heirs or be gifted tax-free.
With these new adjustments, taxpayers have more clarity and can plan more effectively for the coming year.
