Tax Agency on Tuesday announced its new inflation-adjusted tax brackets for 2025, with the annual income thresholds rising by about 2.8% from 2024 – the smallest increase in years.
Every fall, the IRS announces inflation-adjusted changes to the tax brackets and dozens of other provisions for the following tax year. As inflation jumped during the pandemic, bracket adjustments were larger in recent years, reached 7% in 2023 and 5.4% in the current year.
The idea is to protect taxpayers from “bracket creep” – when workers are pushed into higher tax brackets due to the effects of cost-of-living adjustments aimed at offsetting inflation – without changing their standard of living.
But with the US inflation cooling until then lowest level in three yearsThe IRS’s annual adjustments have also gotten smaller.
For example, the new 10% tax bracket threshold for married couples filing jointly will rise to $23,850 in 2025, a 2.8% increase from the 2024 threshold of $23,200
The standard deduction in 2025 will rise to $30,000 for married couples filing jointly, an increase of about 2.7% from the current tax year’s $29,200.
— This is a breaking story and will be updated.