Now that we’re in 2025, the Internal Revenue Service’s updated income tax brackets and higher standard deductions have taken effect. Depending on your income level, these changes could put more money in your paycheck or boost your tax return next year.
If you fall into a lower tax bracket this year, you’ll pay a lower tax rate, which can slightly increase the amount of money you take home each pay period. A higher standard deduction could also help lower your tax bill or boost your income, in some cases.
It’s normal for the IRS to make tax code changes each year to account for inflation. This helps prevent “tax bracket creep,” which could push you into a higher tax bracket, even though inflation is eating into your wages.
These new tax changes went live on Jan. 1. Here’s everything you need to know about next year’s income tax brackets, the standard deduction increase and how tax changes could affect your money.
Read more: Will We See More Tax Breaks Next Year? Who Benefits Under Trump’s Tax Plan
How tax code changes affect your paycheck
When the IRS raises federal income tax brackets, you might fall into a different tax bracket than you did the year before — even if your income has stayed the same.
Source for all charts: IRS (PDF).
Most taxpayers with simple tax returns claim the standard deduction, which reduces their taxable income. If you receive your wages solely from an employer as a W-2 employee, the standard deduction is usually the best way to maximize your tax refund. If you’re self-employed or have specific deductions you’d like to claim, you’ll itemize your deductions instead.
Other 2025 tax changes that may help you
There are other tax changes happening next year that could put more money in your paycheck. If you collect Social Security, you’ll receive a 2.5% cost-of-living-adjustment in 2025. The Earned Income Tax Credit also increased to $8,046 for filers with three or more qualifying children.
The Foreign Earned Income Exclusion, estate tax credits exclusion, annual exclusion for gifts and adoption credit also increased.
More tax advice:
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