2025 Tax Brackets and Key Filing Updates

Staying on top of your tax situation—including updates to the 2025 brackets and other tax law changes—is generally a smart move. Whether you're planning to file soon or simply want to avoid surprises, understanding where your income falls, what deductions you qualify for, and how contribution limits have shifted can help you make informed decisions. 

Ahead, we'll break down the key updates to tax brackets, deductions, credits, and retirement contributions to help you prepare with confidence. 

Passage of the One Big Beautiful Bill Act (OBBBA) earlier this year paved the way for several changes that impact the 2025 tax filing and beyond. Generally, these changes will reduce most people's taxes.

There are still seven income tax rates, but the income ranges (tax brackets) for each rate have shifted slightly to account for inflation. For 2025, the following rates and income ranges apply: 

Long-term capital gains—profits from selling assets held for more than a year—are taxed at lower rates than ordinary income is. For 2025, the capital gains tax rates remain at 0%, 15%, or 20%, but the income thresholds for each rate have been adjusted for inflation.

You may qualify for the 0% capital gains tax rate if your taxable income is:

• Up to $47,025 for single filers or married filing separately
• Up to $94,050 for married filing jointly or qualifying surviving spouse
• Up to $63,000 for head of household

These thresholds act as an exemption amount for the 0% rate—once your income surpasses them, higher rates apply. For example, your long-term capital gains may be taxed at 15% or 20%, depending on your filing status and total taxable income.

The OBBBA raises the standard deduction for 2025 to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married couples filing jointly. 

The OBBBA created several new temporary tax deductions that take effect in 2025 and expire in 2028. What's interesting about these deductions is that they can be taken whether you take the standard deduction or itemize. However, income limits apply, so if you have a higher income, you may not be able to benefit from them. The new deductions include:

• Senior tax deduction for those age 65 and older of up to $6,000 for single filers, or $12,000 for qualified married couples.
• Tips income tax deduction of up to $25,000 of "qualified" income. The deduction is capped at $25,000 for both single filers and joint filers. Note that though this provision is often referred to as "No Tax on Tips," qualified tip income will still be subject to payroll tax and potentially state income taxes (if applicable). The deduction starts to phase out once MAGI is over $150,000 for a single filer, and $300,000 for joint filers.
• Overtime income tax deduction of up $12,500 of qualified overtime pay per person, not to exceed $25,000 (joint filers can claim the full $25,000). Note that the deduction is available only for overtime pay required by the Fair Labor Standards Act (FLSA). Extra pay earned under state laws, collective bargaining agreements, or employers' compensation plans isn't eligible. The deduction starts to phase out once MAGI is over $150,000 for a single filer, and $300,000 for joint filers.
• Auto loan interest deduction of up to $10,000 in car loan interest for a new vehicle purchase. Used cars are ineligible.

For most filers, taking the standard deduction is more practical and saves the hassle of keeping track of receipts. But if you have enough tax-deductible expenses, you might benefit from itemizing. 

Here are some common ones: 

• State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes increases to $40,000 for 2025, but this new amount comes with income limitations. If your income is above those limits your deduction may be limited or be capped at the previous maximum of $10,000.
• Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of indebtedness. But people who had $1 million of home mortgage debt before December 16, 2017, will still be able to deduct the full interest on that loan.
• Medical expenses: Only medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2025.
• Charitable donations: In 2025 there are no changes to the charitable deductions. The annual income tax deduction limits for gifts to public charities¹ are 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash. If you give both cash and non-cash assets the overall limit is generally 50% of AGI. 

The traditional IRA and Roth IRA contribution limits did not change for 2025. Individuals can contribute up to $7,000 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. The contribution limits for tax-deferred 401(k)s and Roth 401(k)s is $23,500 in 2025. If you're age 50 or older, you qualify to make an additional $7,500 catch-up contribution for this tax year as well. 

If you're able, consider maxing out your contributions to these accounts. Doing so can provide a boost to your retirement savings and potentially lower your taxable income. 

For 2025, the maximum you can contribute to an HSA is $4,300 for an individual and $8,550 for a family. People 55 and older can contribute an extra $1,000 catch-up contribution. 

To be eligible for an HSA, you must be enrolled in a high-deductible health plan (which usually has lower premiums, as well). 

Tax credits, which reduce the tax you owe dollar for dollar, are normally better than deductions, which reduce how much of your income is subject to tax. In 2025, the Child Tax Credit increases to $2,200 per child age 17 or younger. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit. 

The estate and gift tax exemption, which is indexed to inflation, rose to $13.99 million for 2025 and was made permanent in the new tax law (it was set to get cut in half in 2026). 

The annual gift exclusion, which allows you to give money to your loved ones each calendar year without incurring any tax liability or using up any of your lifetime estate and gift tax exemption, increases to $19,000 per recipient. 

If you're age 73 or older, make sure you've taken your required minimum distribution (RMD) from your retirement accounts before the end of the year or else you face a 25% penalty on any undistributed funds (unless it's your first RMD, you may have until April 1 of the following year to take it). 

Whether you're filing a straightforward return or navigating a more complex situation due to higher income, understanding how your filing status, deductions, and capital gains thresholds interact with the tax code can help you make smarter decisions. Strategic planning—like timing investment sales or maximizing retirement contributions—can reduce your tax liability and improve your long-term financial outlook.

If your situation is more nuanced, consulting a tax professional may help you uncover opportunities and avoid costly mistakes. The more informed you are before filing your tax return, the better positioned you'll be to take advantage of available exemptions, credits, and planning strategies.