2026 Tax Changes, Brackets and Federal Income Tax Rates

2025 tax law updates: IRS inflation adjustments and OBBBA impacts

For 2025, the IRS inflation adjustments push tax brackets and the standard deduction higher, which can help keep more income in lower rates. Then the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, adds several major changes on top of the usual annual updates, including deductions tied to qualified tips and overtime, a higher SALT cap, an additional $6,000 deduction for many taxpayers age 65+, and extensions of key Tax Cuts and Jobs Act (TCJA) provisions. Depending on your income and deductions, these updates can materially change your 2025 tax outcome, especially for tipped workers, homeowners in high-tax states, seniors, and small business owners.

Updated 2025 tax brackets vs 2024

Higher bracket thresholds across all filing statuses, with the same federal rates.

The seven federal rates stay the same at 10%, 12%, 22%, 24%, 32%, 35%, and 37%, but the IRS increased the income thresholds for each bracket for 2025 (inflation adjustment under Rev. Proc. 2024-40).

What this means in plain English: more of your income may be taxed at the lower rates compared with 2024, which can reduce your overall tax bill, even though the headline rates did not change.

2025 Federal Tax Brackets by Filing Status

Key Bracket Threshold Comparisons (Single Filer)

Note on joint filers: many lower and mid brackets are roughly double the single thresholds, but the top brackets are not always an exact double.

OBBBA impact: it does not change the seven tax rates, but it can still change outcomes through deductions, credits, and eligibility rules, so the bracket inflation bump often stacks with other changes.

Standard deduction changes

Higher standard deductions for all filers, plus a new senior deduction under the One Big Beautiful Bill Act (OBBB).

For 2025, the standard deduction increased for every filing status. The routine IRS inflation adjustment would have raised the deduction to $15,000 (single), $30,000 (joint), and $22,500 (head of household), but OBBB increased the 2025 standard deduction further to the amounts below.

Also, most taxpayers take the standard deduction rather than itemizing. In recent IRS filing data, about 9 in 10 taxpayers used the standard deduction.

2024 vs 2025 standard deduction

Additional amounts (age 65+ or blind) and the new senior deduction

You can still add the normal “additional standard deduction” for being age 65+ and/or blind, and OBBB adds a separate new senior deduction for 2025 through 2028. 

Traditional additional standard deduction (per condition):

OBBB new senior deduction (in addition to the above):

• $6,000 per eligible individual (so up to $12,000 on a joint return if both spouses qualify)
• Begins phasing out when MAGI exceeds $75,000 (single) or $150,000 (joint)
• Available whether you itemize or take the standard deduction

Example: A single filer age 65+ taking the standard deduction could claim $15,750 (base) + $2,000 (age add-on) + $6,000 (OBBB senior deduction) = $23,750 total deductions before any itemized considerations. 

OBBBA’s major 2025 tax changes

New above-the-line deductions plus expanded SALT and Child Tax Credit rules.

The One, Big Beautiful Bill Act adds several major tax changes that first apply to tax year 2025 (filed in 2026). Four of the biggest items are above-the-line deductions, which means they can be claimed whether you take the standard deduction or itemize. In addition, the law increases the SALT cap for itemizers and updates the Child Tax Credit. 

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

Employees and self-employed individuals may deduct qualified tips (as defined by the IRS) up to $25,000. The deduction phases out above $150,000 MAGI for single filers ($300,000 for joint filers). Tips still remain subject to payroll taxes. 

No Tax on Overtime (up to $12,500 single, $25,000 joint)

This deduction applies only to qualified overtime premium required under the Fair Labor Standards Act (FLSA), generally the portion above the regular rate (for example, the “half” in time-and-a-half). The deduction is capped at $12,500 for single filers ($25,000 for joint filers) and phases out above $150,000 MAGI single ($300,000 joint). 

No Tax on Car Loan Interest (up to $10,000)

For eligible new vehicles with final assembly in the United States, you may deduct up to $10,000 of qualified passenger vehicle loan interest. You must include the VIN on the return. The deduction phases out above $100,000 MAGI single ($200,000 joint).

Deduction for Seniors (age 65+, $6,000 per eligible person)

Taxpayers age 65+ may claim an additional $6,000 deduction per eligible individual (up to $12,000 on a joint return if both spouses qualify). It phases out above $75,000 MAGI single ($150,000 joint). 

SALT cap increase for itemizers (up to $40,000)

If you itemize, you can claim up to $40,000 of state and local taxes ($20,000 if married filing separately), increased from $10,000 ($5,000 if married filing separately). The maximum is reduced for taxpayers above $500,000 MAGI ($250,000 if married filing separately). 

Child Tax Credit updates ($2,200 per child, up to $1,700 refundable)

For 2025, the maximum Child Tax Credit increases to $2,200 per eligible child, and up to $1,700 may be refundable (Additional Child Tax Credit). The IRS also highlights SSN requirements for eligibility. 

Quick summary

Practical takeaway: track these items now. The IRS notes that withholding tools and tax software updates are still catching up, and some items require new reporting. 

Who benefits most from 2025 changes

Winners and minimal-impact groups by income, occupation, and location.

Overall, the 2025 changes tend to benefit tipped workers, homeowners in high-tax states, and many seniors the most. Renters and taxpayers in low-tax states often see smaller, mostly inflation-adjustment-driven changes.

Winners

• Tipped and service workers: “No tax on tips” up to $25,000 (subject to income phaseouts).
• High-tax state homeowners (NY, CA, NJ): SALT cap increases to $40,000, which can be meaningful if you itemize.
• Seniors 65+: up to a $6,000 deduction boost (phases out above the MAGI thresholds).
• Families: Child Tax Credit increases to $2,200 per eligible child, which is effectively a $200 increase per child versus $2,000.

Losers or minimal impact

• Renters in states like TX or FL: the SALT change is often less relevant, especially if you do not itemize.
• Gig workers with unreported tips: you must track and report tips properly to claim the deduction.
• Ultra-high earners: income phaseouts can reduce or eliminate many of the new benefits.
• Middle-income families ($80K to $150K): many could see benefits in the $800 to $2,000 range depending on kids, withholding, and whether any of the new deductions apply.

Bottom line: run the numbers, many taxpayers qualify for more than one change, and stacked benefits can be significant.

Key 2025 Filing Deadlines

When to file, when to pay, and how extensions work.

These dates apply to your 2025 tax year return (income earned in 2025, return filed in 2026). The IRS has confirmed the general federal deadline for most taxpayers is Wednesday, April 15, 2026.

OBBBA changes do not shift deadlines, but they may add new reporting details, so e-filing is typically the smoothest path. 

Individual deadlines

• Use IRS Direct Pay for balance-due or estimated payments.
• If you are self-employed, receive tips, or have income without enough withholding, consider quarterly estimated payments to reduce underpayment risk. 
• State deadlines can differ by a day or two due to local holidays, check your state rules.

Individual Deadlines

Pro tips: Use IRS Direct Pay for estimates. Tipped workers/self-employed: Pay quarterly to match new deductions and avoid underpayment penalties. States may vary 1-2 days-check locally.

Planning Steps Before April 2026

W-4 updates, tracking, pro tips.

Act now on 2025 tax year changes from 2024 to cut your bill or boost refunds on April 2026 filings. Focus on OBBBA deductions like tips/SALT before year-end.

Update Your W-4

• Use IRS Withholding Estimator with 2025 brackets/deductions.
• Tipped workers: Reduce federal withholding by ~20% of estimated tip deduction.
• Seniors: Factor $6K bonus to avoid over-withholding.

Track for New Deductions

• Tips/overtime: Log separately; request W-2 separation from employer.
• SALT: Bunch property taxes (Prepay 2026 property taxes in December 2025).
• Vehicle: Buy US-made vehicles by Dec 31, 2025 for interest tracking.

Pro Tips

• Run scenarios in TurboTax/H&R preview.
• Quarterly estimates if self-employed (Jan/Apr/Jun/Sep 2026).
• Consult CPA Q1 2026 for SALT/QBI stacking.

These steps could save $2K+-don’t wait for tax season scramble.

Conclusion and Resources

Next actions and official IRS links.

The shift from 2024 to 2025 US taxes combines inflation relief with OBBBA game-changers like tip deductions, SALT expansion, and senior bonuses – potentially saving eligible filers $1K to $20K+ on 2026 returns.

Next Actions

• Run IRS withholding estimator today with 2025 numbers.
• Log tips/OT and bunch SALT payments before December 31.
• Schedule CPA review Q1 2026 for multi-deduction stacking.
  

Official IRS Resources

• IRS Rev. Proc. 2024-40: Full 2025 brackets/deductions (irs.gov).
• Withholding Estimator: irs.gov/W4app.
• Form 1040 Instructions (2025 preview): irs.gov/forms-pubs.
• OBBBA Guidance: irs.gov/newsroom/one-big-beautiful-bill.
  

Start planning now – small moves lock in big refunds by April 15, 2026.