New tax laws 2025: Tax brackets and deductions

Each year, the IRS makes inflation-related adjustments to more than 60 tax provisions to keep income tax brackets, deductions and other inputs in line with changes occurring related to the cost of living. On average, adjustments for the tax year 2025, including federal income tax brackets (filing returns in 2026), increased by about 2.8%.

Recently, the July 2025 passage of a comprehensive legislative package known as the “One Big Beautiful Bill Act” establishes many new tax laws that become effective immediately. Most importantly, the legislative package makes permanent aspects of the  that were set to expire at the end of 2025.

These adjustments may affect your tax planning strategies going forward. Unless noted, changes in the new tax law go into effect for the 2025 tax year.

2025 tax law changes to tax brackets, deductions, and credits in brief

Here’s a summary of key changes in the new tax bill.

• The seven federal tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent.
• Standard deductions increased, plus a new “bonus” deduction for older adults.
• Alternative minimum tax exemption thresholds reduced for phaseout.
• Child tax credit increased to $2,200 per qualifying child.
• SALT deduction cap increased temporarily, with income-based phaseouts.

2025 tax brackets

For the 2025 tax year, the seven federal tax rates put in place in the TCJA are now permanent: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. 

A key income threshold to watch for high-income filers is $197,300 for single filers and $394,600 for married couples filing jointly. Those are the respective thresholds for moving up from the 24% tax rate bracket to the higher 32% rate bracket. The top marginal income rate of 37% will apply to single filers with taxable income of $626,350 and, for married couples filing jointly, taxable income above $751,600.

2025 standard deduction and new "bonus" deduction

The standard deduction represents the amount of income you can exclude from taxes before the above tax rates begin to apply. The 2025 standard deduction has increased following the new legislation.

In addition, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,350 or the sum of $450 and the individual’s earned income. 

A new “bonus” deduction for older adults was added as part of the new tax package, beginning with the 2025 tax year and remaining in effect through 2028.

For 2025, the total standard plus bonus deduction for those age 65 and older is $21,750 for a single person and $43,500 for a married couple filing a joint return. However, income thresholds apply. Only single filers with modified adjusted gross income (MAGI) of $75,000 or below, or married couples with MAGI of $150,000 or below, can claim the full deduction. It gradually phases out for those with incomes above those thresholds.