The IRS announced federal income tax bracket changes for 2025, with each income threshold increasing by roughly 2.8%, a smaller increase compared to previous years due to cooling inflation. This means that for many individuals with similar wages to 2024, their take-home pay could be slightly higher in 2025, depending on withholdings. The standard deduction also increased for 2025, which could result in individuals paying less in taxes compared to the previous year.
However, despite the potential for higher take-home pay, many Americans may not feel the effects of this increase due to rising prices for certain expenses like groceries, gasoline, and new cars. It is important to monitor state and federal income tax withholdings throughout the year, especially during significant life changes, to ensure that the right amount is being withheld from paychecks.
Overall, while tax bracket changes may result in a slight increase in take-home pay for some individuals in 2025, this increase may be offset by rising costs of living. It is crucial for individuals to stay informed about their tax withholdings and make adjustments as needed to avoid owing taxes or receiving a smaller refund at the end of the year.
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