IRS Announces New Tax Deductions for 2025: What You Need to Know

The Internal Revenue Service (IRS) is here to remind you what taxpayers will face in 2025; the countdown has begun. In one of the main news, also a higher standard deduction, because it is in relation to inflation. Taxpayers will receive some financial relief, but those keeping score should note that the change is not as big as it was in other tax cycles.

The standard new deduction for single filers and those married but filing separately will increase to $15,000 in 2025, a rise of $400 from 2024. As married couples filing jointly, you will see the standard deduction at $30,000 versus $23,000 (an $800 increase), and as a head of household, your standard deduction will be at $22,500 versus $16,000 (a $600 rise). Revisions to the income thresholds for all seven federal tax brackets accompany all of these changes.

What are federal income tax brackets and how have they changed in 2025

The federal income tax bracket refers to the percentage of your taxable income you must pay in federal income tax. If you already know your gross income (brought in from employment, benefit, investment, etc.) minus your deductions, by all means calculate this number. There will be this number that will be your taxable income.

Once you’ve figured out that number, it’s then divided into portions, or brackets, and increased in cost, progressively, as brackets climb. The tax percentages haven’t changed for these brackets, but the amount of money you have to earn to move to the next higher tax bracket has adjusted to keep up with the cost of living increase.

The new tax rates for 2025 are:

• The 37 percent tax bracket, however, stands and will be applied to single taxpayers making more than $626,350 in 2025.
• For incomes above $250,525 (or $501,050 for married filing jointly), the 35 percent tax bracket will now apply.
• For instance, at incomes above $197,300 (or $394,600 filing jointly), the 32 percent tax bracket will now apply.
• Those who make more than $103,350 ($206,700 for married couples filing jointly) will now be subject to 24 percent.
• For incomes above $48,475 (or $96,950 for married couples filing jointly), the 22 percent tax bracket will now apply.
• Under the new law, incomes above $11,925 (or $23,850 if married filing jointly) will be taxed at a 12 percent bracket.
• Incomes of $11,925 or less (or $23,850 or less for a married couple filing jointly) will fall within the 10 percent tax bracket.

How the IRS applies the tax brackets

The fundamental problem with most people’s understanding surrounding tax brackets is that they don’t understand that every spot on a tax bracket does not mean all of your income is being taxed for that tax bracket. If that were true, this would be a bit more complicated, but it does take fairness into the tax system because everyone pays all the same percentages on their income.

All percentages would be applicable on each part of the income for someone earning above the highest tax bracket but for the one who is earning just $58,000, the first part will be taxed at 10 percent, the rest of the income between $11,925 and $48,475 will be taxed at 12 percent and the rest amount will be taxed at 22 percent.

This includes modifications to the IRS tax provisions in addition to the income tax bracket changes mentioned above. They include altering long-term capital gains tax brackets, changing the estate and gift tax exemption, and who gets to keep the child tax credit. If you think you will be qualifying for a particular deduction or tax credit in 2025, then it’s worth checking the IRS on what the new requirements will be for you to qualify.

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