IRS sets new tax brackets, raises standard deduction for 2025 [Video]

The Internal Revenue Service (IRS) on Tuesday announced its inflation adjustments to tax brackets and deductions for the 2025 tax year, potentially giving Americans a chance to increase their take-home pay next year.

Each year, the IRS updates the federal income tax bracket as well as the standard deduction and other tax policies to avoid a phenomenon known as “bracket creep,” which occurs when taxpayers are pushed into higher tax brackets due to increasing income despite their purchasing power being unchanged or reduced because of high inflation.

While the IRS goes through the process of making inflation adjustments annually, the increases are more significant and impactful for taxpayers during periods of high inflation.

This year, the IRS is shifting brackets higher by about 2.75%. By comparison, last year’s adjustment was about 5.4% – which reflects the elevated inflation that was prevailing in the U.S. economy in the preceding year in comparison with the past year.

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