What is a tax bracket?
The federal government uses a progressive income tax system, which means that a person’s income tax rate increases as their income increases. A tax bracket generally refers to the range of income that is subject to a particular income tax rate. There are seven federal income tax brackets for tax years 2024 and 2025. The lowest tax bracket is 10% and the highest tax bracket is 37%.
It is important to note that your highest tax bracket is generally not the tax rate that applies to all of your income. For example, moving from the 22% tax bracket to the 24% tax bracket would not mean that all of your income is now subject to the 24% tax bracket. Only the amount of income that exceeds the maximum for the 22% tax bracket would be subject to the 24% tax rate. A common misconception is that earning additional income results in all of your income being subject to a higher tax rate.
What are the tax brackets for 2024 and 2025?
For tax years 2024 and 2025, the seven tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Your highest tax bracket depends on how much taxable income you earn during the year, as well as your filing status. The tax brackets are at different income levels for the various filing statuses of single, head of household, and married filing jointly.
For 2024, the following tax brackets for individuals and married couples filing jointly apply:
- 37% for incomes over $609,350 for individuals or $731,200 for married couples filing jointly.
- 35% for incomes over $243,725 for individuals or $487,450 for married couples filing jointly.
- 32% for incomes over $191,950 for individuals or $383,900 for married couples filing jointly.
- 24% for incomes over $100,525 for individuals or $201,050 for married couples filing jointly.
- 22% for incomes over $47,150 for individuals or $94,300 for married couples filing jointly.
- 12% for incomes over $11,600 for individuals or $23,200 for married couples filing jointly.
- 10% for incomes up to $11,600 for individuals or $23,200 for married couples filing jointly.
For 2025, the tax brackets for individuals and married couples filing jointly have been updated as follows:
- 37% for incomes over $626,350 for individuals or $751,600 for married couples filing jointly.
- 35% for incomes over $250,525 for individuals or $501,050 for married couples filing jointly.
- 32% for incomes over $197,300 for individuals or $394,600 for married couples filing jointly.
- 24% for incomes over $103,350 for individuals or $206,700 for married couples filing jointly.
- 22% for incomes over $48,475 for individuals or $96,950 for married couples filing jointly.
- 12% for incomes over $11,925 for individuals or $23,850 for married couples filing jointly.
- 10% for incomes up to $11,925 for individuals or $23,850 for married couples filing jointly.
It is important to note that those individuals filing as heads of household have higher income thresholds than regular individual filers until they reach the 24% tax bracket for 2024 and the 22% tax bracket for 2025. At the 32% tax bracket in 2024 and the 24% tax bracket in 2025, heads of household filers fall into the same brackets as individual filers.
For 2024, the heads of household tax brackets are as follows:
- 37% for incomes over $609,350.
- 35% for incomes over $243,700 but not over $609,350.
- 32% for incomes over $191,950 but not over $243,700.
- 24% for incomes over $100,500 but not over $191,950.
- 22% for incomes over $63,100 but not over $100,500.
- 12% for incomes over $16,550 but not over $63,100.
- 10% for incomes up to $16,550.
For 2025, the heads of household tax brackets are as follows:
- 37% for incomes over $626,350.
- 35% for incomes over $250,500 but not over $626,350.
- 32% for incomes over $197,300 but not over $250,500.
- 24% for incomes over $103,350 but not over $197,300.
- 22% for incomes over $64,850 but not over $103,350.
- 12% for incomes over $17,000 but not over $64,850.
- 10% for incomes up to $17,000.
How do I find out my tax bracket and federal income tax rate?
To determine your income tax bracket, you need to know your taxable income and your filing status. Once you have that information, you can see which tax brackets may apply to you. For tax year 2024, you can find the tax bracket information in Rev. Proc. 2023-34. For tax year 2025, you can find the tax bracket information in Rev. Proc. 2024-40.
For example, to determine the tax brackets for a single taxpayer with $80,000 of taxable income in 2024, the first step would be to review Rev. Proc. 2023-34. Next, you would find the tax brackets for unmarried individuals. From there, you would be able to see that the first $11,600 of taxable income is taxed at 10%, the next $11,601 to $47,150 is taxed at 12%, and the final $47,151 to $80,000 is taxed at 22%. In this example, the taxpayer would have some income taxed at 10%, some at 12%, and some at 22%. The tax rate on the last dollar earned is referred to as the marginal tax rate, which would be 22% in this example.
How can I change which tax bracket I am in?
The two factors that impact the highest tax bracket that you are in are your taxable income and your filing status. By lowering your taxable income, you may be able to lower the highest tax bracket that you are in. There are many options for lowering your taxable income, including:
- Contributing to pre-tax retirement accounts.
- Contributing to a health savings account (HSA) or flexible spending account (FSA).
- Deducting business expenses.
- Depreciating certain business purchases.
- Making charitable donations.
- Claiming a tax deduction.
- Selling stocks for a capital loss.
The right strategy for you depends on your specific tax situation, so it is often best to talk to your Tax Pro to learn how you might reduce your taxable income.
Another way to change your income tax bracket is to change your filing status. Your filing status changes when you get married or divorced. For a single person without a dependent, having a child or adopting a child generally causes your filing status to change to head of household. If there has been a change in your marital status, or if there has been a change in dependents on your tax return, you should determine if your filing status should be updated.
Can investing in retirement or my business lower my tax rate or bracket?
Yes, contributing to your retirement account may lower your marginal tax rate. By contributing to a pre-tax retirement account, your taxable income is reduced, and the highest tax bracket you fall into may be lower. In any case, your overall tax burden is generally lower if you reduce your taxable income by making contributions to your retirement account. However, contributions to certain types of retirement accounts may not lower your taxable income. For example, contributions to a Roth IRA do not reduce your taxable income.
Investing in your business can put you in a lower income tax bracket in some situations, especially if those investments are immediately deductible. However, many types of investments in a business may not lower your taxable income in the year the investment is made. For business owners, tax planning in advance can lead to significant tax savings and benefits.
If you have more questions about how to lower your taxable income or tax planning, reach out to a Rocket Legal Pro for affordable legal advice. If you need tax help, Rocket Lawyer can now match you with a Tax Pro for affordable and convenient tax filing services.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
