It’s never too early to start planning ahead to save money on taxes. The new inflation adjustments just announced by the IRS are for tax year 2025, for which taxpayers will file tax returns in early 2026.
When inflation is elevated, you’ll see shifts in tax brackets and items like standard deductions. Currently, inflation is modest, so the adjustments from 2024 to 2025 are much less significant than those we saw in 2024 (from 2023).
The IRS adjusts more than 60 tax provisions for inflation every year to prevent what is called “bracket creep.” Tax bracket creep occurs when inflation, rather than real increases in income, pushes people into higher income tax brackets or reduces the value they receive from credits and deductions.
In 2025, the income limits for all tax brackets and all filers will be adjusted for inflation, see Table 1. The federal income tax has seven tax rates in 2025: 10, 12, 22, 24, 32, 35, and 37 percent. The top marginal income tax rate of 37% will hit taxpayers with taxable income above $626,350 for single filers and above $751,200 for married couples filing jointly.
Table 1. 2025 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
| Tax Rate | For Single Filers | For Married Individuals Filing Joint Returns | For Heads of Households |
| 10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
| 12% | $11,925 to $48,475 | $23,850 to $96,950 | $17,000 to $64,850 |
| 22% | $48,475 to $103,350 | $96,950 to $206,700 | $64,850 to $103,350 |
| 24% | $103,350 to $197,300 | $206,700 to $394,600 | $103,350 to $197,300 |
| 32% | $197,300 to $250,525 | $394,600 to $501,050 | $197,300 to $250,500 |
| 35% | $250,525 to $626,350 | $501,050 to $751,600 | $250,500 to $626,350 |
| 37% | $626,350 or more | $751,600 or more | $626,350 or more |
The standard deduction amounts can be found in Table 2 below. Seniors over age 65 may claim an additional standard deduction of $2,000 for single filers and $1,600 for joint filers.
Table 2. 2024 Standard Deduction
| Filing Status | Deduction Amount |
| Single | $15,000 |
| Married Filing Jointly | $30,000 |
| Head of Household | $22,500 |
| Additional Amount for Married Seniors | $1,600 |
| Additional Amount for Unmarried Seniors | $2,000 |
Qualified Business Income Deduction: The Tax Cuts and Jobs Act included a 20% deduction for pass-through businesses. Limits on the deduction begin phasing in for taxpayers with income above $197,300 (or $394,600 for joint filers) in 2025. This deduction is also set to expire at the end of 2025.
Annual Exclusion for Gifts: In 2025, the first $19,000 of gifts to any person are excluded from tax, up from $18,000.
For items such as the Child Tax Credit, Long Term Capital Gains, Earned Income Tax Credit, Alternative Minimum Tax, etc, please reference the Tax Foundation link HERE.
Contact Us: Slight tweaks to federal income tax brackets and other inflation adjustments could help our clients take home more dollars, and alongside the shifts to rules for retirement savings in 401(k) and individual retirement accounts also save a little bit more money in 2025, according to TFG Financial Advisors! Call toll free or contact us at cpa@fuoco.com and we can start running projections early in the year for you. We can help you explore the potential for flexibility with your tax strategy, and be more strategic with your deductions and investment strategies since there is more wriggle room to manage the current year’s tax liability.
