Federal Tax Brackets Announced for 2025
The federal income tax rates that apply for individuals (10%, 12%, 22%, 24%, 32%, 35% & 37%) won’t change next year, but the income tax brackets for individual taxpayers will increase based on inflation. For 2025, the income brackets will increase by 2.8% as follows:
This means that you can earn more income in 2025 vs. 2024 before being taxed in a higher tax bracket at a higher rate.
The lowest rate of 10% applies to single filers maker $11,925 or less and married filers making $28,350 or less. At the high end, you’ll need to make $626,350 filing singly or $751,600 filing jointly before you hit the top 37% rate.
You can qualify for a 0% tax rate on realized capital gains if you earn $48,350 or less filing singly and $96,700 filing jointly.
The standard deduction will also be easier to remember in 2025 at $15,000 for single filers and $30,000 for joint filers.
Keep in mind that these rates and brackets may only be good for 2025 as they are all set to “sunset” back to the pre-2017 levels that were in place before the Tax Cuts and Jobs Act (TCJA) was passed by the Trump administration in 2017. It would take an act of Congress to extend the TCJA rates or otherwise alter the provisions.
Without action by Congress, the sunsetting of the TCJA provisions would also mean that the $10,000 cap on the deductions for state and local (property) taxes would also go away in 2026.
Because any changes require Congressional action, we won’t necessarily know more in two weeks following the election, but we’ll have a better idea of what’s likely to happen depending on the outcome.
Either way, it’s always a good idea to be having a conversation about tax planning with your ACM Wealth Advisor and you should be on the lookout for our upcoming series of year-end planning commentaries, which we’ll be starting next Monday.
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