What's My 2025 Tax Bracket?

About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C., area who works with clients virtually across the country. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals at any stage of life take control of their finances and fulfill their dreams. Feel free to schedule a Free Consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals. 

Understanding your tax bracket is crucial for effective financial planning in 2025 and beyond. Tax brackets are adjusted annually due to inflation and policy changes. Here, we outline the tax brackets for 2025 and some ways to reduce your taxable income.

2025 Federal Income Tax Brackets

The IRS adjusts tax brackets annually based on inflation, and for 2025, here are the tax rates for different income levels:¹

Single Filers:

• 37% for incomes over $626,250
• 35% for incomes over $250,525
• 32% for incomes over $197,300
• 24% for incomes over $103,350
• 22% for incomes over $48,475
• 12% for incomes over $11,925
• 10% for incomes $11,925 or less

Married Filing Jointly:

• 37% for incomes over $751,600
• 35% for incomes over $501,050
• 32% for incomes over $394,600
• 24% for incomes over $206,700
• 22% for incomes over $96,950
• 12% for incomes over $23,850
• 10% for incomes $23,850 or less

2025 Important Numbers Guide

There are lots of important numbers that you need to keep in mind. In some cases, those numbers are annual limits that change each year. Other times, the figures do not often change, but are used frequently. In response to this challenge, I’ve created the two-page

Important Numbers 2025 Summary Guide

This quick reference guide covers the most important annual limits as well as figures that are commonly referred to during the year. It includes:

• Tax rates for MFJ, Single, and Estates/Trusts
• AMT annual limits
• LTCG rates for MFJ, Single, and Estates/Trusts
• Standard deductions for MFJ and Single
• Social Security annual limits (including earning limits)
• Full Retirement Age chart
• Social Security taxation summary for MFJ and Single
• IRMAA surcharges
• Retirement plan annual limits
• Traditional and Roth IRA annual limits
• Education tax credits
• Uniform Lifetime Table (abbreviated version)
• Single Lifetime Table (abbreviated version)
• Estate and gift tax annual limits

How Tax Brackets Work

You may think that if your income falls into a certain tax bracket, your entire income is taxed at that rate. However, the U.S. uses a marginal tax system, which means that only the income within each bracket is taxed at that rate. For example, if you’re a single filer earning $50,000, only the portion of your income above $48,475 is taxed at 22%, while the lower portions are taxed at the corresponding lower rates.

Standard Deductions for 2025

The standard deduction reduces your taxable income, which can significantly impact the tax you owe. For 2025, the standard deductions are:¹

• Single: $15,000
• Married Filing Jointly: $30,000
• Head of Household: $22,500

If your itemized deductions exceed the standard deduction, it may be beneficial to itemize, especially if you own a home, have high medical expenses, or make significant charitable contributions.

How to Reduce Your Tax Burden

While tax brackets determine how much you owe, several strategies can reduce your taxable income and keep more money in your pocket. Here are just a few strategies to consider:

Contribute to Retirement Accounts
Contributions to tax-advantaged retirement accounts, such as a 401(k) or an individual retirement account (IRA), lower your taxable income. In 2025, you can contribute up to $23,500 to a 401(k) and up to $7,000 ($8,000 if 50 or older) to a traditional IRA.²

Use a Health Savings Account (HSA)
If you have a high-deductible health plan, contributing to an HSA offers tax advantages. The 2025 contribution limits are $4,300 for individuals and $8,550 for families.³

Take Advantage of Tax Credits
Tax credits directly reduce your tax bill rather than just your taxable income. Popular credits include:

• Child Tax Credit: Provides up to $2,000 per qualifying child under age 17.⁴
• Earned Income Tax Credit (EITC): For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046.¹
• American Opportunity Tax Credit: This tax credit helps students and parents with education costs, offering up to $2,500 per eligible student for tuition, fees, and course materials.⁵

Consider Tax-Loss Harvesting
If you have investment losses, you can use them to offset capital gains and reduce your tax burden. Up to $3,000 of excess losses can be deducted against ordinary income per year.⁶

When you understand your tax bracket and utilize tax-saving strategies, you can make informed financial decisions and keep more of your hard-earned money. As always, talk to your tax professional to help you maximize your deductions and credits while staying compliant with IRS regulations.

Different Ways You Can Work With Us

Wealth Management - Combines ongoing financial planning and investment management. The financial planning fee is waived if we manage at least $1,000,000 in investments for you. You can review our investment management fee structure here. Tax Preparation and the ability to create a Will or Revocable Trust-based Estate Plan will be included.

Ongoing Financial Planning - Starting at $400/month, our most popular program now includes tax prep. This is a good fit if you have several goals and want the option to manage your investments. We'll cover everything from spending, insurance, taxes, investments, retirement planning, and estate planning. Our goal is to give you and your family an easy-to-understand comprehensive plan to provide you with confidence you're making the right financial decisions.

One-Time Financial Plan With Ongoing Support - Starting at $4,800, this is an accelerated version of the service above with additional support for one year after your start date. This service requires prepayment for the year and is offered at a significant discount from the annual pricing for ongoing planning. Tax Preparation and the ability to create a Will or Revocable Trust-based Estate Plan will be included.

Tax preparation is now part of the ongoing financial planning program. This will be in addition to the Tax Report we already generate for clients and our work with the IRS Withholding Calculator to help prevent our clients from getting a surprise tax bill.

Three-Hour Ask Me Anything - This is a good fit if you have 2-3 goals you want help with. These three one-hour meetings need to be completed within three months. The fee for this service is $2,000. You also get a free 30-minute meeting to help us get started.

Financial Coaching - Our financial coaching program starts at $99/month. This is ideal for someone who is looking to simplify and automate their finances. We'll also serve as an accountability partner and help you overcome obstacles that may be stopping you from accomplishing your goals. You can learn more about our coaching program here. If you think this program might be a good fit for you, schedule a 15-Minute Demo.

Hourly Financial Planning -Billed at $400 per hour. For each hour of meeting time, we'll bill at least one additional hour for meeting preparation and follow-up.

Our Full-Service Process For New Clients

Net Worth and Budget

The first thing I do for new clients is assess their current financial situation. We do this with the aid of financial planning software. We review assets, liabilities, income, and expenses. If you'd like to test drive my comprehensive financial planning software, visit Right Capital and create a profile. View this Right Capital video to learn more.

Insurance

As a Fee-Only Firm, we don’t sell insurance or charge commissions. However, we like to review home, auto, and umbrella insurance to ensure you have the proper coverage. We’re happy to work with your existing agent or refer you to an independent broker to ensure you get the best deal. We also look at your employee benefits, long-term and short-term disability insurance, along with life insurance to make sure your family is protected.

Tax Preparation and Tax Planning

Tax preparation is now part of the ongoing financial planning program. This will be in addition to the Tax Report and Tax Planning we already generate for clients. We also use the IRS Withholding Calculator to help prevent our clients from getting a surprise tax bill.

Investments

Whether you want us to manage your investments or you want to manage them yourself and you're just looking for a second opinion, we can help. We'll help you optimize your investments to make sure you’re not leaving any money on the table. Here’s an example of the quantitative analysis I can do for your investment accounts where we also evaluate your current fees.

If you’d like to review your risk tolerance, complete our risk tolerance questionnaire. This will give you your personalized risk number as seen on page 1 of the sample portfolio above. Feel free to check out the article 10 Best Tips for Beginning Investors from U.S. News where I shared a few investment tips.

Retirement Planning

This is where we bring everything together. Take a look at the links below for examples of some of the deliverables we prepare for clients.

• Get Your Free Retirement Check Up
• Elements® Financial Monitoring App
• One Page Financial Plan
• Financial Independence Presentation

Estate and Legacy Planning

If you're looking for a cost-effective solution to get your estate planning documents in place, we can help. We have partnered with a leading Estate Planning platform to deliver high-quality Estate Planning documents for a fraction of the cost of working with an attorney. I included a blog post below that highlights the key documents that should be in your Estate Plan and my normal pricing.

What's In Your Estate Plan?

Revocable Living Trust-Based Estate Plan

• Individual - $1,600
• Couple - $2,100

Will-Based Estate Plan

• Individual - $900
• Couple - $1,400

I hope we get the opportunity to work together. If you'd like to see if any of these services are a good fit for you, feel free to schedule a free consultation or send me an e-mail.

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