Federal income tax brackets are expected to increase in 2025 but at lower percentages than in previous years, according to reports.
Tax brackets are likely to be adjusted higher by 2.8% for the 2025 tax year, according to CBS News, which cited an analysis by Bloomberg Tax. The change would be the smallest inflation adjustment in at least three years, following a 5.4% increase in 2024 and 7.1% boost in 2023, the report showed.
The increase means a single filer earning up to $11,600 in 2024 would be able to earn $11,925 under the 2025 bracket before being assessed 10% in taxes. A person paying 24% on their taxable income would see their maximum earnings before they’re moved into a higher tax bracket rise from $191,950 to $197,300, according to the CBS analysis.
Individual tax rates will remain the same: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Tax brackets are determined using a formula based on the Consumer Price Index, or CPI, which looks at the cost of goods and services and inflationary increases. They are adjusted each year to prevent what’s called “bracket creep,” or what happens when inflation pushes taxpayers into higher income tax brackets or reduces the value of credits, deductions and exemptions without an increase in real income.
Once released, the new brackets will apply to 2025 for taxes paid in 2026.
Forbes has other projections related to what taxpayers can expect. You can see more here.
