The IRS recently released the inflation-adjusted federal income tax bracket ranges for the 2025 tax year. While the tax rates on each of the seven brackets remain the same – 10%, 12%, 22%, 24%, 32%, 35%, and 37% – the income range for each bracket has changed.

The annual adjustment helps the IRS avoid “bracket creep,” when workers get pushed into a higher bracket simply because of cost-of-living pay increases rather than any real increase in income.

Income thresholds will increase by about 2.8%, a much smaller hike than the past few years, which reflects U.S. inflation dropping to its lowest level in three years.

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It’s important to note that tax brackets are tied to tax rates that are marginal, meaning they only apply to the amount that falls within that particular tax bracket, not to the entire amount of income.

More Changes for Tax Year 2025

The IRS also announced inflation adjustments to the 2025 standard deduction amounts. The standard deduction is a portion of income that is not subject to tax. About 90% of taxpayers use the standard deduction rather than itemizing their taxes. The new amounts:

• Married couples filing jointly and surviving spouse filers: $30,000 (up $800 from 2024)
• Married couples filing separately and single filers: $15,000 (up $400 from 2024)
• Heads of household: $22,500 (up $600 from 2024)

The alternative minimum tax (AMT) exemption amounts also increased. The AMT was created in the 1960s to prevent high-income taxpayers from avoiding individual income taxes. To prevent low- and middle-income individuals from being subject to the tax, taxpayers are allowed to exempt a significant portion of their income from the calculation. For 2025, the AMT exemption amount is $88,100 for single earners and $137,000 for married taxpayers who are filing jointly.

The annual gift tax exclusion also increased – to $19,000 in 2025, up from $18,000. This is the amount of money one may transfer to another person each year without incurring a gift tax.

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Unchanged for tax year 2025 are personal exemptions, which continue to remain at zero as part of 2017’s Tax Cuts and Jobs Act, and itemized deductions, which have no limitations.

The Tax Cuts and Jobs Act is scheduled to sunset on Dec. 31, 2025. Learn more about what changes could mean for future returns at this link.