As the time for filing taxes in 2024 draws near, it is essential for practitioners to take into consideration the tax numbers and rates that will be applicable to their clients in the following year, according to the Internal Revenue Service.
These numbers were made public by the Internal Revenue Service (IRS) through Revenue Procedure 2024-40 at the end of October, and for your convenience, we have highlighted the most important facts.
The following is a tax bracket breakdown for the year 2025, broken down according to the various filing statuses:
- 10%
- Single: $0 – $11,925
- Married Filing Jointly: $0 – $23,850
- Married Filing Separately: $0 – $11,925
- Head of Household: $0 – $17,000
- 12%
- Single: $11,926 – $48,475
- Married Filing Jointly: $23,851 – $96,950
- Married Filing Separately: $11,926 – $48,475
- Head of Household: $17,001 – $64,850
- 22%
- Single: $48,476 – $103,350
- Married Filing Jointly: $96,951 – $206,700
- Married Filing Separately: $48,476 – $103,350
- Head of Household: $64,851 – $103,350
- 24%
These revised tax brackets are absolutely necessary for making financial decisions for the following year, as they are crucial for planning and strategizing.
Be careful to keep yourself updated on these developments so that you can provide greater assistance to your customers.
Understanding the New IRS Tax Brackets for 2025
Now that we are getting closer to the year 2025, it is absolutely necessary to become familiar with the revised tax brackets and basic deductions.
The planning of your finances may be dramatically altered as a result of these developments. The new tax brackets and deductions are going to be discussed in detail, so let us get started.
IRS: New Income Tax Brackets
Adjustments have been made to the income tax bands for the year 2025 in order to take inflation and other economic factors into consideration. The following is a rundown of the revised bracket settings:
- 32% Tax Bracket:
- Income between $103,351 and $197,300
- Income between $206,701 and $394,600
- 35% Tax Bracket:
- Income between $197,301 and $250,525
- Income between $394,601 and $501,050
- 37% Tax Bracket:
- Income over $626,350
- Income over $751,600
Enhanced Standard Deductions
There will be more relief for taxpayers as a result of the increase in the standard deduction for 2025, which is higher than the deduction for 2024. The following information is provided according to the various filing statuses:
- Single:
- 2025: $15,000
- 2024: $14,600
- Married Filing Jointly:
- 2025: $30,000
- 2024: $29,200
- Married Filing Separately:
- 2025: $15,000
- 2024: $14,600
- Head of Household:
- 2025: $22,500
- 2024: $21,900
In order to make educated judgments regarding one’s finances, it is essential to get knowledge regarding these upgrades. If you are aware of these developments, you will be better able to prepare for the tax requirements that you will have in 2025.
Additionally, the Earned Income Credit for 2025 has been revised to take into account inflation increases.
This credit provides essential financial assistance to families and people who are qualified for it. To get the most out of these developments, it is necessary that you have a solid understanding of them.
2025 Earned Income Credit Breakdown
You can receive a different amount of the Earned Income Credit based on the number of children you have. The following is a detailed breakdown of the most recent amounts:
IRS: Earned Income Amount
- 1 Child: $12,730
- 2 Children: $17,880
- 3 or More Children: $17,880
- No Children: $8,490
Maximum Amount of Credit
- 1 Child: $4,328
- 2 Children: $7,152
- 3 or More Children: $8,046
- No Children: $649
IRS: Phaseout Thresholds
To properly plan, it is essential to have a solid understanding of the phaseout thresholds. Your filing status and income level are taken into consideration when determining these thresholds, which determine when the credit begins to phase out.
Married Filing Jointly
- Threshold Phaseout Amount: $30,470
- Completed Phaseout Amount:
- 1 Child: $57,554
- 2 Children: $64,430
- 3 or More Children: $68,675
- No Children: $26,214
All Other Filing Statuses
- Threshold Phaseout Amount: $23,350
- Completed Phaseout Amount:
- 1 Child: $50,434
- 2 Children: $57,310
- 3 or More Children: $61,555
- No Children: $19,104
IRS: Estate and Gift Tax Updates
During the year 2025, the estate and gift tax has undergone considerable modifications, in addition to the Earned Income Credit. These modifications include:
- Basic Exclusion for Decedents: $13,990,000
- Annual Gift Tax Exclusion for Individuals: $19,000
For this reason, it is essential to keep yourself updated and, if necessary, seek the advice of a financial counselor. These updates have the potential to have a significant impact on your financial planning.