The IRS has unveiled its inflation adjustments for the 2025 fiscal year, set to influence returns filed in 2026. This update encompasses shifts in tax brackets and the standard deduction, among other key changes.

While tax rates remain unchanged for 2025, the income thresholds for each bracket have been adjusted upward to account for inflation and “bracket creep.” This phenomenon can elevate taxpayers into higher tax brackets or diminish the benefits of deductions and credits, despite no actual rise in income. However, keep in mind that tax rates might rise in 2026 if the expiring provisions of the Tax Cuts and Jobs Act of 2017 are not extended.

The adjustments for the upcoming tax year are notably modest, with increases falling below 3%, marking them as some of the smallest in recent history.

Revised Income Tax Brackets for 2025

For single filers, the updated brackets are as follows:

• 37% for incomes surpassing $626,350 (previously $609,350)

• 35% for incomes exceeding $250,525 (up from $243,725)

• 32% for incomes above $197,300 (previously $191,950)

• 24% for incomes over $103,350 (an increase from $100,525)

• 22% for incomes over $48,475 (previously $47,151)

• 12% for incomes above $11,925 (up from $11,600)

• 10% for incomes at or below $11,925

For those filing jointly, the new thresholds are:

• 37% for incomes over $751,600 (increased from $731,200)

• 35% for incomes above $501,050 (previously $485,450)

• 32% for incomes surpassing $394,600 (up from $383,900)

• 24% for incomes exceeding $206,700 (increased from $201,050)

• 22% for incomes above $96,950 (previously $94,300)

• 12% for incomes over $23,850 (an increase from $23,200)

• 10% for incomes at or below $23,850

It’s important to remember that tax rates are marginal rather than flat. This means that different portions of income are taxed at different rates. For instance, if filing singly, the first $11,925 is taxed at 10% (resulting in $1,192), while income earned from $11,926 to $48,475 is taxed at 12%, and so forth.

Increase in Standard Deduction

The IRS has also revised the standard deduction for 2025, increasing it to $15,000 for single filers (up from $14,600) and to $30,000 for couples filing jointly (up from $29,200). The standard deduction, which is utilized by approximately 90% of taxpayers, reduces taxable income and can lead to a lower tax liability or a higher refund. For those whose deductions exceed these amounts, itemizing may be the more beneficial approach.

Additional Tax Changes for 2025

There are several other tax modifications that will affect various taxpayers next year.

Specifically, the thresholds for capital gains tax—applying to the profit earned from selling appreciated assets—will also experience increases. For single filers earning up to $48,350 and couples earning up to $96,700, the tax on capital gains will be 0%. If single filers earn between $48,350 and $533,400, they will incur a 15% tax, while married couples will face a similar bracket of 15% for incomes between $96,700 and $600,050. Income surpassing $533,400 for singles (or $600,050 for married couples) will be taxed at 20%. Additionally, the estate tax exclusion is climbing from $13.61 million to $13.99 million, and donations up to $19,000 will be tax-exempt, a rise from $18,000 for 2024.

Moreover, the Earned Income Tax Credit for those with low to moderate incomes will see an increase from $632 to $649 for singles, while families with three or more children will benefit from an increase of the maximum credit from $7,830 to $8,046.