IRS Announces 2025 Tax Brackets with Higher Standard Deduction

The IRS has released the official 2025 tax brackets, providing updated income thresholds, standard deductions, and credits in response to inflation.

These changes will affect the taxes filed in 2026, helping taxpayers with inflation adjustments to deductions, credits, and tax brackets.

2025 Federal Income Tax Brackets and Rates

The IRS has set new income thresholds for each tax bracket. In 2025, the federal income tax system will maintain seven tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

The highest marginal rate of 37% will apply to single filers earning over $626,350 and married couples filing jointly who earn more than $751,600. Other rates and their respective income brackets are slightly higher than those from 2024:

• 10% rate: For single filers earning up to $11,925, married couples filing jointly earning up to $23,850, and heads of households earning up to $17,000.
• 12% rate: For single filers with incomes between $11,925 and $48,475, married couples earning between $23,850 and $96,950, and heads of households with incomes between $17,000 and $64,850.
• 22% rate: For incomes between $48,475 and $103,350 for single filers, $96,950 and $206,700 for married couples filing jointly, and $64,850 to $103,350 for heads of households.
• 24% rate: Applies to incomes between $103,350 and $197,300 for singles, $206,700 and $394,600 for married couples, and $103,350 to $197,300 for heads of households.
• 32% rate: For single filers earning $197,300 to $250,525, married couples earning $394,600 to $501,050, and heads of households with incomes of $197,300 to $250,500.
• 35% rate: For single filers with incomes from $250,525 to $626,350, married couples earning $501,050 to $751,600, and heads of households earning between $250,500 and $626,350.
• 37% rate: For incomes over $626,350 for single filers and heads of households, and $751,600 or more for married couples filing jointly.

These inflation-adjusted brackets prevent “bracket creep,” which occurs when inflation increases income without increasing real purchasing power, pushing taxpayers into higher tax brackets.

Higher Standard Deduction in 2025

For 2025, the IRS has increased the standard deduction to $15,000 for single filers, which is a $400 increase from 2024.

For married couples filing jointly, the deduction rises to $30,000, up by $800 from the previous year. Heads of households will see their deduction rise to $22,500 from $21,900 in 2024.

Taxpayers aged 65 or older can also claim an additional standard deduction. In 2025, this additional deduction is $2,000 for single filers and $1,600 for married couples filing jointly. These increases reduce taxable income for millions of Americans.

Earned Income Tax Credit and Child Tax Credit Increases

In 2025, taxpayers with low to moderate incomes will see an increase in the earned income tax credit (EITC).

The maximum credit for taxpayers with three or more children will increase to $8,046, up from $7,830 in 2024.

The credit is structured to support working families, with the maximum amount varying based on the number of children:

• $649 for taxpayers without children.
• $4,328 for one child.
• $7,152 for two children.
• $8,046 for three or more children.

The phaseout for the EITC begins at $10,620 for single filers and $17,730 for married couples filing jointly.

The child tax credit will remain at $2,000 per qualifying child, with up to $1,700 refundable in 2025, helping families reduce their tax burden.

Adjustments to Long-Term Capital Gains Tax Rates

The IRS has also made inflation adjustments to capital gains tax brackets for 2025. Long-term capital gains (for assets held over one year) will be taxed at different rates depending on income.

Single filers will qualify for the 0% rate if their taxable income is $48,350 or less, while married couples filing jointly will qualify with incomes up to $96,700.

The 15% capital gains tax rate applies to incomes up to $533,400 for singles and $600,050 for married couples. The top rate of 20% kicks in for taxable incomes above those thresholds.

Alternative Minimum Tax (AMT) Updates

The alternative minimum tax (AMT) ensures that high-income taxpayers can’t avoid paying taxes by using credits or deductions.

The 2025 AMT exemption increases to $88,100 for single filers and $137,000 for married couples filing jointly.

The AMT exemption starts phasing out at incomes of $626,350 for singles and $1,252,700 for married couples.

The AMT is levied at two rates: 26% and 28%. The 28% rate applies to income over $239,100 for single filers and $119,550 for married individuals filing separately.

Gift Tax Exclusion and Estate Tax Changes

For 2025, the annual exclusion for gifts has increased to $19,000 per person, up from $18,000 in 2024.

This allows taxpayers to give gifts of up to $19,000 to individuals without triggering the gift tax. The exclusion for gifts to spouses who are not U.S. citizens increases to $190,000.

Qualified Business Income Deduction (Sec. 199A)

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced a 20% deduction for pass-through businesses, which remains available for taxpayers in 2025.

However, income limits apply, with phaseouts starting at $197,300 for single filers and $394,600 for married couples filing jointly.

This deduction benefits small businesses, allowing them to reduce their taxable income by up to 20%, subject to limits based on income and the nature of the business.