The IRS has announced new income limits for its seven tax brackets for 2025, with thresholds increased by about 2.7% to adjust for inflation. This follows a 5.4% increase in 2024 and a historically large 7% bump in 2023 due to inflation.
While reaching a top one percent income is becoming more challenging given the threshold keeps increasing, at least those whose incomes aren’t keeping pace with inflation can expect some tax relief.
Let’s dive into the 2025 income tax brackets and standard deduction amounts. Then we’ll explore the new ideal income targets for single filers, married filers, and retirees. For the nearly 50% of working Americans who pay income taxes, these brackets often represent our largest ongoing expense.
2025 Income Tax Brackets
For 2025, the IRS has increased the income threshold for each tax bracket by about 2.7% across all filing categories, compared to 2024.
The seven federal income tax rates, established by the 2017 Tax Cuts and Jobs Act, remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Before the 2017 Tax Cuts and Jobs Act, the highest marginal federal income tax rate was 39.6%.
Income levels are based on taxable income (not gross or adjusted gross income). Taxable income is calculated by subtracting the standard or itemized deduction—whichever is greater—from your adjusted gross income (AGI).
The Ideal Income to Earn in 2025 – 24% Tax Bracket
In my opinion, the highest federal marginal tax bracket one should aim to pay is 24%. Beyond this, every dollar earned above $197,300 for singles and $394,600 for married couples in 2025 gets taxed at 32%, marking a steep 8% jump.
If you’re working in a high-tax state, you could easily be paying close to 40% of each dollar above the 24% bracket threshold. Does paying 40% or more