IRS: Taxpayers to get big deductions and see changes in tax brackets by 2025

US taxpayers will also see a higher standard deduction in 2025, allowing them to protect more of their income from taxes on future returns.

The Internal Revenue Service detailed the increase in annual inflation adjustments announced Tuesday. For single taxpayers and married individuals filing separately for the 2025 tax year, the standard deduction rises to $15,000 — up $400 from 2024.

For couples filing jointly, that standard deduction will be $30,000 in 2025, an $800 jump from last year. And heads of households will get a standard deduction of $22,500, up to $600 starting in 2024.

The income thresholds for all seven levels of federal tax have also been revised upwards. The top tax rate, which remains at 37%, will include income of more than $626,350 for a single taxpayer in the 2025 tax year, for example – compared to $609,350 in 2024.

The IRS makes such adjustments each tax year to account for inflation, which has recently fallen. Last month, US inflation fell to its lowest level in more than three years, marking some encouraging economic news – but Americans are still feeling significant price pressures.

“Core” prices, a gauge of inflation, remained high in September, driven by rising costs of health care, clothing, auto insurance and airline fares.

While taxpayers will see higher standard deductions by 2025, the increases announced Tuesday are smaller than those seen in recent years. In tax reforms announced last year, for example, the IRS increased the standard deduction for single filers by $750 between the 2023 and 2024 tax years — and by $1,500 and $1,100 for married couples and heads of household, respectively.

Earlier this month, the Social Security Administration announced a 2.5% cost-of-living increase for benefit recipients beginning in January. That means an average jump of more than $50 in monthly checks for millions of people.

Similar to recent tax deduction figures, the upcoming COLA adjustment is lower than seen in the past. Social Security recipients received a 3.2% benefit increase in 2024, after a massive 8.7% benefit increase in 2023, driven by a 40-year record inflation. A slight increase next year indicates moderate inflation.

-Wyatte Grantham-Philips, Associated Press business writer