Tax bracket changes could mean your salary will be slightly higher in 2025 – here’s what you need to know

When the first paycheck of 2025 hits your bank account, it might hold a little more money due to IRS tax bracket changes.

The IRS announced federal income tax brackets for 2025 in October, which increased each income threshold by about 2.8%. For comparison, tranches increased by around 5.4% in 2024.

The annual inflation adjustment is “much less drastic this year” amid slowing inflation, said CPA Brian Long, senior tax advisor at Wealth Enhancement in Minneapolis.

The Consumer Price Index, a key measure of inflation, rose 2.7% in November 2024 from a year earlier, down from the recent high of 9.1% in June 2022 .

Why your take-home pay could be higher

If you start 2025 with a similar salary to 2024, your take-home pay — or your pay after taxes and benefit deductions — could be a bit higher, depending on your withholdings, according to Long.

“When all the tax brackets go up, but your salary stays relatively the same, that puts you at a lower rung on the ladder,” he said.

Federal income tax brackets show how much you owe on each part of your “taxable income,” which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

“Even if you earn a little more than last year, you might actually pay less in taxes in 2025 than in 2024” because the standard deduction has also increased, Long said.

For 2025, the standard deduction increases to $30,000 for married couples filing jointly, up from $29,200 in 2024. The tax break is also larger for single filers, who can claim $15,000 in 2025, up from $14,600. $.

“It ends up almost balancing out.”

Despite the tax bracket changes, many Americans won’t feel the increase in wages because of the high prices of some expenses, said Sheneya Wilson, a CPA and founder of Fola Financial in New York.

“It ends up almost balancing out,” she said.

Even though inflation is no longer accelerating, prices for groceries, gasoline and new cars increased in November, according to the Bureau of Labor Statistics.

Whether take-home pay is more or less than expected, it’s important to monitor your state and federal income tax withholdings throughout the year, especially during major income or life changes. Wilson said.

Generally, if you withhold too much money from your paycheck, you can expect a refund, while withholding too little often results in taxes owing.