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Every year, the Internal Revenue Service (IRS) adjusts over 60 tax provisions for inflation to prevent "bracket creep." Bracket creep occurs when inflation, rather than actual income increases, pushes taxpayers into higher income tax brackets or reduces the value of credits and deductions.

Prior to 2018, the IRS used the Consumer Price Index (CPI) as a measure of inflation. However, the Tax Cuts and Jobs Act of 2017 (TCJA) changed the measure to the Chained Consumer Price Index (C-CPI). The IRS uses C-CPI to adjust income thresholds, deduction amounts, and credit values accordingly.

The new inflation adjustments will be applied to the 2025 tax year, for which taxpayers will file their tax returns in early 2026. On average, tax parameters adjusted for inflation will increase by approximately 2.8 percent.

2025 Federal Income Tax Brackets and Rates

The 2025 federal income tax brackets and rates will be adjusted for inflation and are as follows (Table 1). There will be seven tax rates in 2025: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The highest marginal income tax rate of 37 percent will apply to taxpayers with taxable income above $626,350 for single filers and above $751,600 for married couples filing jointly.

For more detailed information on the specific income thresholds for each tax bracket and filing status, please refer to the official IRS publication or consult with a tax professional.