NEW YORK — U.S. taxpayers can expect increased standard deductions for the 2025 tax year, allowing them to protect more of their income from taxation in future returns.
In its annual inflation adjustments, the Internal Revenue Service (IRS) revealed the new figures. For single taxpayers and married individuals filing separately, the standard deduction will rise to $15,000, an increase of $400 from 2024.
Couples filing jointly will see their standard deduction jump to $30,000 for 2025, up $800 from the previous year. Heads of households will receive a standard deduction of $22,500, reflecting a $600 increase from 2024.
Additionally, the income thresholds for all seven federal tax bracket levels have been adjusted upwards. For instance, the top tax rate of 37% will apply to single taxpayers with incomes exceeding $626,350, rising from $609,350 in 2024.
The IRS conducts these adjustments annually to account for inflation, which has shown a recent downward trend. Last month, inflation in the U.S. reached its lowest level in over three years, signaling positive economic developments, although consumers continue to feel significant price pressures.
“Core” inflation, which measures underlying price changes, remained elevated in September, driven by increased costs in medical care, clothing, auto insurance, and airline fares.
While taxpayers will benefit from higher standard deductions in 2025, these adjustments are notably smaller than those made in previous years. For reference, the IRS had raised single filers’ standard deduction by $750 between the 2023 and 2024 tax years and increased the deductions for married couples and heads of households by $1,500 and $1,100, respectively.
Moreover, the Social Security Administration announced a 2.5% cost-of-living adjustment (COLA) for benefit recipients starting in January, leading to an average increase of more than $50 in monthly payments for millions. This upcoming COLA adjustment is lower than previous years, following a 3.2% increase in 2024 and an 8.7% adjustment in 2023, which was prompted by record inflation rates. Next year’s lower increase indicates a trend of moderating inflation.
