What the New 2025 Tax Bracket Updates Mean for You

The IRS has officially released its annual tax bracket updates for tax year 2025 (so, taxes you’ll file next year), and while the changes may seem subtle at first glance, they can have some noteworthy impacts on your income and tax planning. Let’s break it down.

Updated Tax Brackets: What’s Changing?

A bracket is a range of income that's taxed at a specific rate. Because the U.S. tax system is progressive, your income increases at certain thresholds, and each portion is taxed at higher rates. Lower brackets apply to lower portions of income, and higher brackets apply to higher portions. That means you only pay a higher tax rate on the portion of your income that falls into a higher tax bracket. 

Every bracket got a slight nudge upward—here’s what that looks like on both ends of the income spectrum:

• The lowest tax bracket (10% federal tax rate) now applies to income up to $11,925, up from $11,600 in 2024.

• The highest tax bracket (a 37% tax rate) starts at $626,351, up from $609,000 in 2024.

What These Changes Look Like in Reality 

Let’s provide a hypothetical to illustrate the changes.  Let’s say you’re a single filer earning $75,000 annually in taxable income. Here’s how your federal income tax liability would look under the 2024 and 2025 brackets:

2024 Tax Brackets (Single Filer)

• 10% on the first $11,600: $1,160

• 12% on income between $11,601 and $47,500: $4,296

• 22% on income between $47,501 and $75,000: $6,050

Total Federal Tax (2024): $11,506

2025 Tax Brackets (Single Filer)

• 10% on the first $11,925: $1,192.50

• 12% on income between $11,926 and $48,750: $4,422.48

• 22% on income between $48,751 and $75,000: $5,775.98

Total Federal Tax (2025): $11,390.96

The Impact:

• Total annual tax savings: $115.04

• Monthly take-home increase: ~$9.58

• Effective tax rate (2024): 15.34%

• Effective tax rate (2025): 15.19%

Bigger Deductions = Bigger Savings

Just like tax brackets, the standard deduction will also be ticking up slightly for the 2025 tax year. 

• Single filers: $15,000 (up from $14,600).

• Married filing jointly: $30,000 (up from $29,200).

• Heads of household: $22,500 (up from $21,900).

This is great news if you don’t plan to itemize deductions (and most filers don’t), it means you can automatically shave more off your taxable income. 

 Tyler Horn, Origin Certified Financial Planner®, adds some insight on this: "While it's easier to simply take the standard deduction, there are a number of ways to increase your itemized deductions to surpass the standard deduction. One strategy is bunching your deductions. Bunching means you save some of your expenses for one year to get a bigger tax break. For example, you can donate more to charity in one year or pay property taxes early. It’s a smart way to plan if you’re close to the standard deduction limit. Think about using this trick when your expenses are higher than normal."

Gift and Capital Gains Tax Updates

If gifting or investing is part of your financial strategy, there’s more good news:

• The annual gift tax exemption limit has increased to $19,000 per recipient for individuals and $38,000 for couples, allowing for greater tax-free transfers of wealth.

• Capital gains tax brackets have shifted slightly, offering additional savings opportunities for investors. Notably, the 0% rate now applies to individuals earning up to $48,350 and couples earning up to $96,700.

Is There Anything You Should Adjust or Do Differently?

One subtle result of these tax updates could be a slight bump in your take-home pay as withholding amounts adjust. Instead of letting that extra cash disappear into day-to-day expenses, consider investing it. Funnel those dollars into a retirement account or other investment vehicles and let compound interest work its magic. Keeping your budget steady while allocating extra funds for your future could yield significant long-term benefits.

Updating your withholding is also something to consider. "In practice, the way to adjust your withholding would be to update your W4. A W4 is an IRS form you can fill out to ensure that your company is withholding the correct amount. You can find this form with included instructions for how to fill it out here. The IRS also has a Tax Withholding Estimator that can help you estimate the federal income tax you want your employer to withhold from your paycheck. You can find that calculator here. My CFP® recommendation is to use these official tools to help adjust your withholdings versus attempting the same exercise with paper napkin math." — Tyler Horn, Origin Certified Financial Planner®

This information is provided for informational purposes only and is not intended to be tax or legal advice.

Stay Informed

For more insights and updates on how tax changes impact your finances, The Gist, Origin’s personal finance newsletter, is a great resource. It’s designed to keep you in the loop on relevant tax updates, financial strategies, and more—all delivered straight to your inbox.

Plan Ahead for 2025 and Beyond

The majority of taxpayers will simply take advantage of the new, higher standard deduction, and stand to benefit from these slightly updated tax brackets, meaning for most filers — there’s not much you’ll need to do. Still, staying up-to-date and understanding where you stand in relation to routine updates like this can help you make smarter tax planning considerations this year. 

If you want to make things even simpler, you can file your taxes this year right where you manage your money - all on Origin. With Origin, you can file federal, state, and joint returns quickly and accurately – all with your maximum refund guaranteed. From crypto gains to living in multiple states, we’ve got you covered without the extra fees, so you keep more of what you’ve earned.

Join Origin(opens in new window)