The IRS released their IRS Tax Brackets in 2025, which include a modest increase in the income limits for each tax band in comparison to 2023. The seven federal income tax rates that will apply in 2024 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
IRS Tax Brackets 2025
In 2024, the tax inflation adjustments increased by 5.4% compared to 2023 (a little lesser amount than the 7.1% rise in the 2023 tax year over 2022 rates).
Earnings exceeding $609,350 for individual single filers will be subject to the maximum tax rate of 37% in 2024, up from $578,125 in the previous year. In the meanwhile, persons earning $11,600 or less are subject to the lowest level of 10%, which increased from $11,000 in 2023.
This implies that your tax payment amount may vary from 2023 to this year. Let’s take an example where you are a single filer and your taxable income in 2023 is $45,000. Your income is divided into three tax bands for taxation purposes:
- 10% of your first $11,000 in revenue, which reduces to $1,100;
- 12% of any income between $11,001 and $44,725 ($33,724), which reduces to $4,046.88;
- and 22% of the remaining income, which reduces to $60.28, from $44,726 to $95,375 ($274).
- Taxes on this total for the year 2023 come to $5,207.16.
Let’s now assume that in 2024 you make $45,000 per year. Things will appear a bit different in your tax bracket.
- 10% of your income for the first $11,600, or $1,160.
- 12% of your income for any income between $11,601 and $47,150 ($33,399), or $4,007.88.
- Taxes on this total for the year 2024 come to $5,167.88.
Tax brackets are a component of a progressive tax system, which raises tax rates gradually as a person’s income does. Higher earnings are placed in tax categories with higher rates, whereas lower incomes are placed in brackets with substantially lower income tax rates.
2024 tax brackets and income tax rates
For the 2024 tax year, there will be seven income tax rates, ranging from 10% to 37%. Income for this year is reported on tax returns filed in 2025 and is subject to the tax rates of 2024.
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head Of Household |
| 10% | $11,600 or less | $23,200 or less | $11,600 or less | $16,550 or less |
| 12% | $11,601 to $47,150 | $23,201 to $94,300 | $11,601 to $47,150 | $16,551 to $63,100 |
| 22% | $47,151 to $100,525 | $94,301 to $201,050 | $47,151 to $100,525 | $63,101 to $100,500 |
| 24% | $100,526 to $191,950 | $201,051 to $383,900 | $100,526 to $191,950 | $100,501 to $191,950 |
| 32% | $191,951 To $243,725 | $383,901 to $487,450 | $191,951 to $243,725 | $191,951 To $243,700 |
| 35% | $243,726 To $609,350 | $487,451 to $731,200 | $243,726 to $365,600 | $234,701 To $609,350 |
| 37% | Over $609,350 | Over $731,200 | Over $365,600 | Over $609,3 |
These seven federal tax rates will remain in effect for the 2024 tax year and the 2025 return due date: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Your tax bracket will be determined by your filing status, taxable income, including wages, and other factors.
How do you reduce the amount of taxes you owe?
The first step in lowering your tax liability is to see whether there are any tax credits that you qualify for. Tax credits provide a dollar-for-dollar reduction in your tax obligation by directly lowering the amount of taxes you owe.
For instance, your tax obligation is lowered to $1,500 if you have a $2,000 tax burden and are eligible for a $500 tax credit. The IRS website provides information on tax credit alternatives, such as:
- The Earned Income Tax Credit
- Child Tax Credit And Child And Dependent Care Tax Credit
- American Opportunity Tax Credit
Tax deductions decrease your taxable income by allowing you to deduct certain costs or contributions from the amount that the IRS may tax, while tax credits immediately cut your tax burden.
These deductions may be made in the form of an itemized deduction, which requires a list of qualifying costs, or a standard deduction, which is a reduction of a set amount. Expenses like mortgage payments, charity donations, and school costs provide the basis for deductions.
For instance, if you have student loans, you may be able to write off the interest you paid. Additionally, you are eligible to deduct contributions made to a qualified pre-tax retirement plan, such as a conventional IRA or 401(k) offered by your employer. On the other hand, income tax will apply to your withdrawals.
How income tax brackets work
Federal income tax rates are progressive
There is a progressive tax system in the US. This means that the government divides your taxable income into portions, commonly referred to as tax brackets, and taxes each portion at the appropriate tax rate to determine how much tax you owe. The marginal rate, which is the highest tax rate, only applies to a part of your income.
People with greater taxable earnings pay higher federal income tax rates, while those with lower taxable incomes pay lower federal income tax rates, according to the progressive tax system. The benefit of tax brackets is that, regardless of your income bracket, you won’t pay that rate of tax on the whole amount of money you make.
Federal tax brackets example: As a single filer, you would pay 10% tax on the first $11,000 of your taxable income and 12% tax on the portion of your income between $11,001 and $44,725 if you earned $50,000 in 2023.
Because a portion of your $50,000 in taxable income is in the 22% tax bracket, you would then pay 22% on the remaining amount. You are in the 22% rate, yet the entire amount would be around $6,300, or about 13% of your taxable income. Your effective tax rate is 13%.
State income taxes may work differently than federal income taxes
States and the federal government may manage taxes in various ways. It’s possible that your state uses a different system entirely, or that it uses brackets differently.
Wyoming is one of the states without a state income tax, while Colorado is one state with a flat tax rate of 4.4% on taxable income.
Federal Income Tax Brackets Are adjusted annually for Inflation
Every year, all income tax brackets, or the range of income within which a tax rate starts and stops, are adjusted to account for the current inflation rate. These changes—officially referred to as inflation adjustments—are an essential component of the tax system.
They may assist in preventing “bracket creep,” the process by which taxpayers move into a higher tax bracket when their cost of living increases. Adjusting a tax band may also result in reduced taxes for individuals whose income has not increased in line with inflation.
Tax inflation adjustment example
A single filer with $45,000 in taxable income in 2023 will pay 10% tax on $11,000 of their income, 12% tax on the amount between $11,001 and $44,725 in income, and 22% tax on the $275 that is left over and falls into that last tax bracket.
In 2024, this taxpayer will pay 10% on earnings up to $11,600 and 12% on any more income, if their income stays the same. Stated differently, they will stop paying 22% on any portion of their income.
This is because the taxpayer may now shield a larger portion of their income from a higher tax rate thanks to an upgrade to the top end of the 12% tax band, which was previously $44,725 to $47,150.
What is a marginal tax rate?
The highest tax rate you pay on your income is known as your marginal tax rate. You never pay a single rate on your whole income since the IRS taxes your income at progressive rates on several levels.
For instance, your marginal tax rate is 22% if you are a single filer and your income in 2023 was $70,000. This is because your income was in the $44,276 to $95,375 tax bracket. However, only $25,724 ($70,000 – $44,27) of your income is subject to 22% tax. You pay a 10% tax on your income up to $11,000 and a 12% tax on your taxable income from $11,001 to $44,725 in income.
What is an effective tax rate?
The average proportion of your taxable income that you owe in federal taxes is known as your effective tax rate. You divide the amount you owe by your total taxable income to arrive at this number.
Using the example of a single filer with $70,000 in taxable income, here is how this appears:
- 10% of their income for the first $11,000, or $1,100;
- 12% of their income for any income from $11,001 to $44,725, or $4,046.88;
- and 22% of their income from $44,726 to $70,000, or $5,560.28.
- This results in a total tax obligation of $10,707.16. An effective tax rate of 15.29% is obtained by dividing that amount by the total taxable income of $70,000.
How to reduce taxes owed
Credits and deductions are two popular strategies to lower your tax liability. Regardless of your tax rate, tax credits may lower your tax liability on a dollar-for-dollar basis.
Tax deductions, however, lower the amount of your income that is liable to taxes. Deductions often result in a reduction of your taxable income equal to the percentage of the highest federal income tax rate. Therefore, a $1,000 deduction might result in a $220 tax savings if you are in the 22% tax rate.
Put another way, make sure you claim all of your tax deductions. By lowering your taxable income and maybe moving you into a lower tax band, deductions can decrease your effective tax rate.
Pros and Cons of Tax Brackets
A flat tax structure, in which everyone is taxed at the same rate regardless of income level, contrasts with tax brackets and the progressive tax system they produce.
Pros
- People with higher incomes are better able to maintain a high quality of life while still paying income taxes.
- People with low incomes pay less, which gives them more money to sustain themselves.
- High-income earners get tax relief via tax deductions and credits, which also encourage charitable giving and other beneficial behavior.
Cons
- Rich folks wind up with a disproportionate share of the tax burden.
- Because brackets force the rich to concentrate on obtaining tax breaks, many of them underpay their taxes, which denies the government income.
- Lower personal savings are the result of progressive taxation.
How Income Tax Brackets And Rates Have Evolved Over The Years
Every year, the IRS modifies the tax brackets and rates to conform to the most recent tax legislation. Higher-income earners’ highest tax rate was 39.6% in 2013, but it is now just 37%.
In the past, not only have rates been modified, but also the income tax brackets. A married couple filing jointly in 2019 with a $600,000 household income, for instance, would have paid taxes at the highest rate of 37%. The same couple’s income would only be subject to a maximum tax rate of 35% in 2024, however.
The rates and brackets for income taxes are always changing. It was originally made available in 1913 and has reached up to 94%. The current highest tax rate of 37% became operative in 2018.
Potential Ways to Get into a Lower Tax Bracket
By lowering your taxable income for the year, you may be able to move into a lower tax rate. Here are a few approaches to consider:
Maximize potential tax breaks.
If you itemize, any deductions you take out may decrease your taxable income and place you in a lower tax rate. Make sure you are taking advantage of every deduction for which you qualify.
Consider bunching Deductions if you Plan to itemize.
- Bunching is the practice of focusing deductions in a single year and then forgoing one or more years of payments. When your whole year’s worth of itemized deductions is less than the standard deduction, this tactic may be effective.
- Giving to charity all at once over several years may enable the total itemized deductions to surpass the standard deduction, so allowing a tax deduction for a portion of the charitable donations.
- But to use this method, you must be able to contribute enough money in a single year to cover more than a year’s worth of expenses. Depending on the recipient organization and the amount provided, AGI restrictions may apply to the deduction of charitable donations.
Maximize retirement savings.
Every dollar you put into an individual retirement account (IRA) or workplace plan, such as a 401(k) or conventional IRA, might lower your taxable income for the year.1. As an alternative, you might fund a Roth 401(k) or Roth IRA. Although there is no immediate tax deduction, if you meet the 5-year aging rule and other requirements, you may take tax and penalty-free retirement withdrawals.
Health savings account (HSA).
If your health insurance plan has a high deductible, you may save money with a health savings account (HSA). Your tax bracket may drop as a result of the money you put into an HSA, which lowers your taxable income.
Tax-loss harvesting.
If you invest in a taxable brokerage account and anticipate a decrease in income, you may want to hold off on selling successful assets until the next year. Selling assets that have depreciated is another way to lower your taxable income and perhaps your tax rate.
