The IRS reveals your 2025 tax brackets as Trump’s tax cuts are set to expire

The Internal Revenue Service just set its levels for income-tax brackets and a commonly-used deduction that Americans will have for their 2025 taxes.

Take a long look at the numbers. Things might look a lot different for taxes in 2026.

Years after the Trump tax cuts of 2017 lowered most tax rates and nearly doubled the standard deduction, the sunset is coming for those changes. If there’s no congressional action, those numbers will return to their 2017 levels.

Former President Donald Trump and congressional Republicans want to extend the tax cuts. Vice President Kamala Harris has said she will not raise taxes for people making less than $400,000.

But that’s a matter for the presidential campaign trail, and then for whoever’s in the White House and Congress next year.

For now, the IRS’s yearly inflation adjustments to approximately 60 tax provisions can help people with their tax planning. These latest numbers are for 2025 income, and they will be applied to tax returns that Americans will file during the 2026 tax season.

The new levels also serve as a reminder that inflation rates are continuing to cool down.

The standard deduction and the income ranges on the seven income-tax brackets are poised to increase, based on IRS formulas indexing for inflation.

The adjustments for next year come to an 2.88% increase, according to Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting.

The 2025 adjustment is lower than an approximately 5% increase for 2024 returns, and it’s sharply down from an approximately 7% increase for 2023 returns.

“The adjustment this year probably should be viewed as something closer to normal,” he said, noting adjustments were 2.93% in 2022 while they were just over 1% in 2021.

What is the standard deduction for 2025?

The standard deduction will climb to $15,000 from $14,600 for individuals. It’s increasing to $30,000 from $29,200 for married couples filing jointly.

People who file as head of household will get a $22,500 standard deduction, up from $21,900.

The standard deduction reduces taxable income.

About nine in 10 individual income-tax returns take the standard deduction instead of itemizing their deductions in the wake of Trump’s Tax Cuts and Jobs Act boosting the standard deduction.

What are the tax brackets for 2025?

The IRS adjusts tax brackets yearly to avoid “bracket creep,” where people are taxed at higher rates because they have nominally higher income but lack the spending power to show for that income.

The IRS has been adjusting income-tax brackets for inflation since the Reagan administration.

Most people actually fall into multiple tax brackets and not just one. Income from wages and other sources gets taxed at an escalating rate.

The question is what those rates will be starting in 2026, when the Trump-era tax cuts expire. The Tax Cuts and Jobs Act temporarily lowered five of seven rates.

The current 12% rate used to be 15%, while the 22% rate fell from 25%. The 24% was 28% and the 32% rate decreased from 33%. The top marginal rate, a particular flashpoint in the tax debate, fell to 37% from 39.6%.

The conventional idea on tax planning is to defer income and accelerate expenses, said Michael Kramarz, a principal at Kaufman Rossin, based in Florida. That way, a person is paying less tax now on their money but they are benefiting from tax breaks and deductions. But if people think 2025 is the last look at tax rates like these, he said that’s generally going to invert the idea, so taxpayers will want to bring in more income while at lower tax rates. They can also try to slow down tax-deductible expenses, he said. As a result, “when you claim a deduction, your deduction is worth more” because of higher underlying tax rates.

The speed-up may be particularly worthwhile for retirement savers landing at higher tax brackets, said Jasen Wallace, wealth advisor at Exencial Wealth Advisors. He noted the process of paying tax now to convert before-tax IRA money to an after-tax Roth IRA. “If done before the TCJA sunset, Roth conversions for people in the 22% tax bracket are 3.00% more effective, and 4.00% more effective for those in the 24% tax bracket,” Wallace said.

Read the full article at MarketWatch.