CBS News
The IRS will soon set its new 2025 tax brackets. Here’s the impact on your money.
Some Americans could see lower federal income taxes in 2025 due to an annual bracket adjustment by the IRS. On the down side, this relief could be more modest than over the past two years.
The IRS typically announces its new tax brackets each fall, but experts are already forecasting next year’s adjustments by crunching the same inflation data the tax agency uses in its annual resets.
Tax brackets and other provisions are likely to be adjusted higher by 2.8% for the 2025 tax year, according to Bloomberg Tax and financial information services provider Wolters Kluwer, which both published their forecasts earlier this month. That would mark the smallest inflation adjustment in at least three years, following a 5.4% increase in 2024 and a 7.1% boost in 2023.
The smaller projected adjustment for 2025 comes amid rapidly cooling inflation, which dropped to a three-year low in August after touching a 40-year high in 2022.
Why adjusting tax brackets matter
Adjusting the nation’s tax brackets for inflation helps individuals avoid so-called “bracket creep,” or when workers are pushed into higher tax bands due to the impact of cost-of-living adjustments to offset inflation, without a change in their standard of living.
“The IRS adjusts a host of tax elements each year for inflation,”Jackson Hewitt chief tax information officer Mark Steber told CBS MoneyWatch. “Otherwise, as people march through life and get raises for inflation, they could get pushed into higher tax brackets, and that would undercut any benefit from the raise.”
The IRS’ annual inflation adjustments are based on what’s known as the chained Consumer Price Index, as required by the Tax Cuts & Jobs Act (TCJA), Wolters Kluwer noted. Unlike the primary CPI data familiar to consumers, chained CPI more accurately reflects trends in monthly spending, according to the Brookings Institute.
Both Wolters Kluwer and Bloomberg Tax said their forecasts are based on recent chained CPI data.
New thresholds for each tax bracket
Next year’s tax bracket rates will remain the same, but the cutoffs for each band of taxation will rise based on the inflation adjustments. The individual tax rates will remain 10%, 12%, 22%, 24%, 32%, 35% and 37%, as set by the 2017 TCJA.
The upshot: You’ll have to earn more income next year to reach each higher band of taxation. For instance, a single taxpayer who earns $48,000 in 2025 will have a top marginal tax rate of 12%, whereas in 2024 the top marginal tax rate stands at 22%.
Some people misunderstand how tax brackets work, believing incorrectly that their top rate is what they’ll pay on all of their income. Instead, the brackets represent the percentage you’ll pay in taxes on each portion of your income.
For instance, married taxpayers who file jointly and earn more than $23,850 (the top threshold for the 10% bracket) will likely pay $2,385 in federal income tax — or 10% of their first $23,850 in earnings — and then 12% on any income above that amount, up to $96,950.
Standard deduction for 2025
Other tax provisions for the 2025 tax year will also likely increase by about 2.8% next year, including the standard deduction, according to the Bloomberg Tax and Wolters Kluwer estimates. That deduction represents the amount taxpayers can subtract from their income before federal income tax is applied, so a bigger deduction shelters more of your income from taxation.
The standard deduction next year is projected to increase to $30,000 for married couples filing jointly, up from $29,200 in the current tax year. The standard deduction for single taxpayers is forecast to rise to $15,000, up from $14,600 in 2024, Wolters Kluwer said.
Head of household filers will see the standard deduction increase to $22,500 from $21,900, while those who are married but file separately will see an increase to $15,000, versus $14,600 in 2024.
How to use the new tax bracket info
Although the new tax bracket thresholds won’t go into effect into January 2025, it can be useful to know the new parameters now for tax planning purposes, Jackson Hewitt’s Steber notes.
He also recommends completing a year-end tax tune-up to ensure you’ve paid enough to the IRS during the current tax year. That can help avoid an unpleasant surprise come April 15, he added.
Next, take a look at the projected inflation adjustments for 2025, as well as your expected income next year, Steber said. That can allow you to check if you might need to adjust your withholding, for instance, or plan to save more in your 401(k) or IRA plan.
“With these inflationary projections, you can take a swipe at next year,” Steber said..
BALTIMORE — One person was killed and nine others injured in a shooting and fiery crash in the Baltimore suburb of Towson Tuesday night, authorities said.
Law enforcement responded at around 7:15 p.m. in the 8500 block of Loch Raven Boulevard, Baltimore County Police Chief Robert McCullough said in a news briefing.
“It appears to be a mass shooting incident,” McCullough told reporters. “We have multiple persons who were shot. Right now, we are determining the circumstances and the conditions in this case.”
The first arriving officer found a vehicle on its side in flames near a funeral home, McCullough said, and then several gunshot victims were found in the area.
“There appears to be some type of incident that led to the vehicle crashing and catching on fire,” McCollough said. “Investigators are looking into the circumstances leading up to that.”
The name of the person killed and the manner of death was not released, nor were the conditions of the nine people injured. McCollough did not specify how many of the nine people injured were gunshot victims.
At this time, investigators believe this was an isolated and targeted incident, with no further threat to the community, he added. It’s unclear if any suspects have been arrested. There was no word on a possible motive.
“We will leave no stone unturned and we will dedicate every resource to this,” McCullough said. “We don’t generally see incidents like this in our community in Baltimore County. I assure you as your police chief that we will put all resources toward trying to clear this case.”
The Bureau of Alcohol, Tobacco, Firearms and Explosives was at the scene assisting police, as was the Baltimore County Fire Department.
“This is an incident that is shocking, particularly for those of us in Baltimore County,” said Baltimore County Executive Johnny Olszewski. “These types of incidents are unheard of here, so it really shocks the conscience. However, we want our residents to know that we are, as always, fully committed to ensuring that both our fire and police departments have the full support and all the resources they need from the Baltimore County government to ensure that they bring this investigation to a conclusion.”
Anyone with information is asked to call Baltimore County Police at 410-887-4636.
President-elect Donald Trump announced he will nominate Herschel Walker, the former football player whose 2022 Senate run was plagued by controversy, to serve as U.S. ambassador to the Bahamas.
“Herschel has spent decades serving as an Ambassador to our Nation’s youth, our men and women in the Military, and athletes at home and abroad,” Trump said on social media Tuesday night.
Walker would need to be confirmed by the Senate to assume the role. The Senate has not confirmed a U.S. ambassador to the Bahamas in over a decade. Former President Barack Obama had nominated Cassandra Butts for the role in 2014, but the Senate never even brought her nomination up for a vote, according to The Associated Press. She died in 2016.
Trump in his first term nominated Doug Manchester in 2017 for the ambassador role, but his nomination stalled for over two years. CBS News in 2019 also uncovered evidence of a possible pay-to-play scheme for the role. He eventually withdrew and Trump went on to nominate William Douglass in 2020. Douglass’ nomination was withdrawn by President Biden when he took office, and Mr. Biden in turn nominated Calvin Smyre, who has not been confirmed by the Senate.
Absent an official ambassador to the Bahamas, Kimberly Furnish currently serves in the role of Chargé d’Affaires.
Walker rose to national prominence as a star running back for the Georgia Bulldogs, winning the Heisman trophy in 1982. He spent his first few years of professional ball in the United States Football League before it folded, and then moved on to the NFL.
Walker reentered the national spotlight when, at Trump’s urging, he challenged Georgia’s Democratic Senator Raphael Warnock for his seat in 2022. The race featured several controversies, including two women claiming that Walker — who was running as an anti-abortion candidate — had paid for them to get abortions.
Walker denied both allegations.
In one instance, Walker admitted to writing a check for a woman who said he paid for her to get an abortion in 2009, but he said he hadn’t known what the money was for.
Another woman claimed Walker paid her to get an abortion while the two carried out a six-year relationship while he was married to another woman and playing in the NFL. During a news conference back in 2022, she said she couldn’t go through with the procedure when she went to get it herself, so Walker took her to a clinic in the Dallas area the next day and waited for her while she got the abortion.
“This was a lie a week ago and it is a lie today,” Walker said at the time following an interview the woman gave a week after the initial news conference.
Warnock would go on to win the election in a runoff after neither candidate received more than 50% of the vote on election day.
Aaron Navarro and
contributed to this report.
BALTIMORE — One person was killed and nine others injured in a mass shooting in the Baltimore suburb of Towson Tuesday night, authorities said.
Law enforcement responded at around 7:15 p.m. in the 8500 block of Loch Raven Boulevard, Baltimore County Police Chief Robert McCullough said in a news briefing.
“It appears to be a mass shooting incident,” Baltimore County Police Chief Robert McCullough told reporters. “We have multiple persons who were shot. Right now, we are determining the circumstances and the conditions in this case.”
The first arriving officer found a vehicle on its side in flames, McCullough said, and then several gunshot victims were found in the area. The name of the person killed was not released, and the conditions of the nine people injured was unknown.
At this time, investigators believe this was an isolated and targeted incident, with no further threat to community at this point, he added. It’s unclear if any suspects have been arrested.
The Bureau of Alcohol, Tobacco, Firearms and Explosives is at the scene assisting police, as was the Baltimore County Fire Department.
Anyone with information is asked to call Baltimore County Police at 410-887-4636.
This is a developing story and will be updated.
