IRS: Taxpayers will get larger standard deductions in 2025

NEW YORK (AP) — U.S. taxpayers will again see higher standard deductions in 2025, allowing them to shield more of their money from taxes on future earnings.

The Internal Revenue Service detailed the increases in its annual inflation Adjustments announced on Tuesday. For single and married individuals who file separate tax returns for the 2025 tax year, the standard deduction increases to $15,000 – an increase of $400 from 2024.

For couples filing jointly, this standard deduction for 2025 is $30,000, an increase of $800 from the previous year. And heads of household get a standard deduction of $22,500, $600 more than in 2024.

The income limits for all seven federal tax brackets have also been revised upwards. For example, the top tax rate, which remains 37%, covers income of more than $626,350 for single taxpayers in the 2025 tax year – compared to $609,350 in 2024.

The IRS makes such adjustments for each tax year to take account of the recent decline in inflation. Last month: Inflation in the USA fell to the lowest point in more than three years, which represents some encouraging economic news — but Americans are still feeling significant price pressure.

“Core prices,” a measure of underlying inflation, remained elevated in September, driven by rising costs for medical care, clothing, car insurance and airfares.

Even though taxpayers will see higher standard deductions again in 2025, the increases announced Tuesday will be smaller than in recent years. Announced in tax adjustments last yearFor example, the IRS increased the standard deduction by $750 for single filers between tax years 2023 and 2024 — and by $1,500 and $1,100 for married couples and heads of household, respectively.

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

Similar to recent tax deduction numbers, the upcoming COLA adjustment will be smaller than in the recent past. Social Security recipients received a 3.2% increase in their performance in 2024, after a historically large Performance increase of 8.7% in 2023, then transmitted on record 40 years of high inflation. The smaller increase next year reflects easing inflation.