It’s that time of year … the IRS announced tax brackets for 2025. Every fall, the IRS announces inflation adjusted tax brackets for the following year to protect us from inflation pushing us into a higher tax bracket.
US inflation is lower than it’s been in three years and the IRS annual adjustment is smaller than it’s been. The new threshold for the 10% tax bracket for married couples filing jointly will rise to $23,850 in 2025, a 2.8% increase from its 2024 threshold of $23,200.
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Brackets at a Glance
| 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 |
Standard Deduction
The standard deduction will increase by $400 for single filers and by $800 for joint filers (Table 2). Seniors over age 65 may claim an additional standard deduction of $2,000 for single filers and $1,600 for joint filers.
The personal exemption for 2025 remains at $0 (eliminating the personal exemption was part of the Tax Cuts and Jobs Act of 2017 (TCJA).
| Filing Status | Deduction Amount |
|---|---|
| Single | $15,000 |
| Married Filing Jointly | $30,000 |
| Head of Household | $22,500 |
Alternative Minimum Tax
The AMT uses an alternative definition of taxable income called alternative minimum taxable income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, the exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.
The AMT exemption amount for 2025 is $88,100 for singles and $137,000 for married couples filing jointly .
| Filing Status | Exemption Amount |
|---|---|
| Unmarried Individuals | $88,100 |
| Married Filing Jointly | $137,000 |
In 2025, the 28 percent AMT rate applies to excess AMTI of $239,100 for all taxpayers ($119,550 for married couples filing separate returns). AMT exemptions phase out at 25 cents per dollar earned once AMTI reaches $626,350 for single filers and $1,252,700 for married taxpayers filing jointly.
| Filing Status | Threshold |
|---|---|
| Unmarried Individuals | $626,350 |
| Married Filing Jointly | $1,252,700 |
Earned Income Tax Credit
The maximum earned income tax credit (EITC) in 2025 for single and joint filers is $649 if the filer has no children. The maximum credit is $4,328 for one child, $7,152 for two children, and $8,046 for three or more children.
| Filing Status | No Children | One Child | Two Children | Three or More Children | |
|---|---|---|---|---|---|
| Single or Head of Household | Income at Max Credit | $8,490 | $12,730 | $17,880 | $17,880 |
| Maximum Credit | $649 | $4,328 | $7,152 | $8,046 | |
| Phaseout Begins | $10,620 | $23,350 | $23,350 | $23,350 | |
| Phaseout Ends (Credit Equals Zero) | $19,104 | $50,434 | $57,310 | $61,555 | |
| Married Filing Jointly | Income at Max Credit | $8,490 | $12,730 | $17,880 | $17,880 |
| Maximum Credit | $649 | $4,328 | $7,152 | $8,046 | |
| Phaseout Begins | $17,730 | $30,470 | $30,470 | $30,470 | |
| Phaseout Ends (Credit Equals Zero) | $26,214 | $57,554 | $64,430 | $68,675 |
Child Tax Credit
The maximum child tax credit is $2,000 per qualifying child and is not adjusted for inflation. The refundable portion of the child tax credit is adjusted for inflation and will remain at $1,700 for 2025.
Capital Gains Tax
Long-term capital gains face different brackets and rates than ordinary income.
For Unmarried Individuals, Taxable Income Over | For Married Individuals Filing Joint Returns, Taxable Income Over | For Heads of Households, Taxable Income Over | |
|---|---|---|---|
| 0% | $0 | $0 | $0 |
| 15% | $48,350 | $96,700 | $64,750 |
| 20% | $533,400 | $600,050 | $566,700 |
Qualified Business Income Deduction
The Tax Cuts and Jobs Act of 2017 (TCJA) includes a 20 percent 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.
| Filing Status | Threshold |
|---|---|
| Unmarried Individuals | $197,300 |
| Married Filing Jointly | $394,600 |
Annual Gift Exclusion
In 2025, the first $19,000 of gifts to any person are excluded from tax, up from $18,000. The exclusion is increased to $190,000 from $185,000 for gifts to spouses who are not citizens of the United States.
Why Brackets Matter
Q4 is a good time to take a look at your year to date information and be ready for next year. Tax brackets are one of multiple considerations for your overall planning. It’s also important to recognize in planning for retirement.
Are you planning in such a way that you know what your “net” number is (i.e. after taxes)? If not, know that taxes will impact you at a later stage in life. Planning for the “net” allows you to structure your investments and know your monthly income projections today and into the future.
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It is the Little Things
Pesky details may seem like little things. These little things do matter across all areas of contingency planning. Establishing a roadmap for your life and work matters.
These “little things” in life matter throughout life. It’s ok to reach out to resources for help. Send me an Email or Message if you have any questions. For additional information about my work check out @ The Living Planner or @ The Living Planner.
If you’re up for planning across life, my book is a resource for you. The Living Planner What to Prepare Now While You Are Living © Check it out HERE.
For those who seek a step-by-step DIY method to review your personal contingency planning readiness: Check it out HERE.
This quote is a reminder for us all “If you have knowledge, let others light their candles in it.” – Margaret Fuller Have a good week❣️ Lynn
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