2025 Tax Brackets & Rates: Complete Guide to Federal Income Tax

What Are Tax Brackets?

Tax brackets are ranges of income that are taxed at specific rates. The United States uses a progressive tax system, meaning that as your income increases, higher portions of your income are taxed at higher rates. This system is designed to distribute the tax burden more equitably across different income levels.

A common misconception is that moving into a higher tax bracket means all of your income is taxed at that higher rate. In reality, only the income within each bracket is taxed at that bracket's rate. This is known as the marginal tax rate system.

Key Point: Your marginal tax rate is the rate on your last dollar of income. Your effective tax rate (or average rate) is your total tax divided by your total income, which is always lower than your marginal rate.

2025 Federal Income Tax Brackets

For tax year 2025, the IRS has adjusted the tax brackets for inflation. Here are the complete brackets for all filing statuses:

Single Filers

Tax Rate	Income Range	Tax Owed
10%	$0 to $11,925	10% of taxable income
12%	$11,926 to $48,475	$1,192.50 + 12% of amount over $11,925
22%	$48,476 to $103,350	$5,578.50 + 22% of amount over $48,475
24%	$103,351 to $197,300	$17,651 + 24% of amount over $103,350
32%	$197,301 to $250,525	$40,199 + 32% of amount over $197,300
35%	$250,526 to $626,350	$57,231 + 35% of amount over $250,525
37%	Over $626,350	$188,769.75 + 37% of amount over $626,350

Married Filing Jointly

Tax Rate	Income Range	Tax Owed
10%	$0 to $23,850	10% of taxable income
12%	$23,851 to $96,950	$2,385 + 12% of amount over $23,850
22%	$96,951 to $206,700	$11,157 + 22% of amount over $96,950
24%	$206,701 to $394,600	$35,302 + 24% of amount over $206,700
32%	$394,601 to $501,050	$80,398 + 32% of amount over $394,600
35%	$501,051 to $751,600	$114,462 + 35% of amount over $501,050
37%	Over $751,600	$202,154.50 + 37% of amount over $751,600

Head of Household

Head of Household filers enjoy wider tax brackets than single filers. To qualify, you must be unmarried, pay more than half the household expenses, and have a qualifying dependent. The 10% bracket extends to $17,000, and subsequent brackets are similarly expanded.

How Marginal Tax Rates Work

Understanding marginal tax rates is crucial for proper tax planning. Let's walk through an example to illustrate how the system works.

Example: Single Filer with $75,000 Taxable Income

Tax Calculation Breakdown:

First $11,925: $11,925 × 10% = $1,192.50
$11,926 to $48,475: $36,550 × 12% = $4,386.00
$48,476 to $75,000: $26,525 × 22% = $5,835.50

Total Tax: $11,414.00

Effective Tax Rate: 15.2% (not 22%)

Notice that even though this person is in the 22% tax bracket, their effective tax rate is only 15.2%. This is because only the income above $48,475 is taxed at 22%—the rest is taxed at lower rates.

How to Calculate Your Tax

Calculating your federal income tax involves several steps:

Calculate Gross Income: Add up all income sources including wages, self-employment income, interest, dividends, and capital gains.
Subtract Adjustments: Above-the-line deductions like 401(k) contributions, HSA contributions, and student loan interest reduce your Adjusted Gross Income (AGI).
Choose Standard or Itemized Deduction: For 2025, the standard deduction is $15,000 for single filers and $30,000 for married filing jointly.
Apply OBBBA Deductions: New deductions for tips, overtime, auto loan interest, and more can significantly reduce your taxable income.
Calculate Tax: Apply the tax brackets to your taxable income.
Subtract Credits: Tax credits directly reduce your tax liability.

OBBBA Deductions and Your Tax Bracket

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced several new deductions that can significantly reduce your taxable income and potentially lower your effective tax bracket. Here's how these deductions impact your taxes:

No Tax on Tips (Up to $25,000)

If you're in the 22% tax bracket and earn $20,000 in tips, you could save up to $4,400 in federal taxes. For someone in the 12% bracket, that's still $2,400 in savings.

No Tax on Overtime (Up to $25,000)

FLSA overtime pay is now deductible. A worker earning $15,000 in overtime in the 22% bracket saves $3,300.

SALT Deduction (Up to $40,000)

The increased SALT cap from $10,000 to $40,000 is especially valuable for those in high-tax states. If you pay $35,000 in state and local taxes, you can now deduct all of it instead of just $10,000—that's an additional $25,000 deduction.

Calculate Your OBBBA Savings

Use our free calculator to see exactly how much you could save with the new OBBBA deductions.

Calculate Now →

Strategies to Lower Your Tax Bracket

There are several legitimate strategies to reduce your taxable income and potentially move into a lower tax bracket:

1. Maximize Retirement Contributions

Contributing to a traditional 401(k) or IRA reduces your taxable income. For 2025, you can contribute up to $23,000 to a 401(k) ($30,500 if you're 50+) and $7,000 to an IRA ($8,000 if 50+).

2. Health Savings Account (HSA)

HSA contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses. For 2025, limits are $4,300 for individual and $8,550 for family coverage.

3. Claim All OBBBA Deductions

Don't overlook the new deductions for tips, overtime, auto loan interest, and the senior bonus. Use our calculators to maximize these benefits:

4. Tax-Loss Harvesting

Sell investments that have declined in value to offset capital gains. You can also deduct up to $3,000 of net capital losses against ordinary income.

5. Charitable Contributions

If you itemize, charitable donations reduce your taxable income. Consider "bunching" donations in alternating years to maximize itemized deductions.

State Income Taxes

In addition to federal taxes, most states impose their own income tax. State tax rates and structures vary significantly:

No Income Tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming (New Hampshire taxes only dividends/interest)
Flat Tax States: Colorado (4.4%), Illinois (4.95%), North Carolina (4.75%), and others
Progressive Tax States: California (up to 13.3%), New York (up to 10.9%), New Jersey (up to 10.75%)

For detailed information about taxes in your state, visit our State Tax Guide.

Frequently Asked Questions

What is the highest tax bracket for 2025?

The highest federal tax bracket for 2025 is 37%, which applies to income over $626,350 for single filers and over $751,600 for married filing jointly.

How do I know what tax bracket I'm in?

Your tax bracket depends on your filing status and taxable income (after deductions). Find your taxable income, then see which bracket range it falls into using the tables above.

Is it bad to move into a higher tax bracket?

No! Only the income in the higher bracket is taxed at the higher rate. Moving into a higher bracket means you're earning more money, and you'll always take home more money even after taxes.

How do OBBBA deductions affect my tax bracket?

OBBBA deductions reduce your taxable income, which can lower your marginal tax bracket and reduce your overall tax liability. Deductions for tips, overtime, and other categories can save you thousands.