Potential Changes to Tax Brackets
Audio version available here (1 min. 50 sec.)
New tax brackets for 2025 are soon to be announced by the IRS. These changes are made every year to coincide with inflation. This way, taxpayers who get raises to compensate for rising costs of living won’t be penalized for their increased wages by getting taxed at a much higher rate. In anticipation of this news, here are expert predictions of what the adjustments could look like.
Based on data from the chained Consumer Price Index released by the US Bureau of Labor Statistics, experts predict tax brackets to be adjusted by 2.8%. This is much smaller than in previous years. 2023’s inflation adjustment was 7.1%, while 2024 was adjusted by 5.4%. This makes sense, as inflation has slowed down significantly compared to the extreme rise seen from 2021 through 2023. However, it also means that any raises to income a taxpayer receives may bring them closer to jumping into a higher tax bracket. Still, the goal of these bracket adjustments is to prevent this from happening.
Additionally, the standard deduction is expected to increase. Currently, the standard deductions are as follows. Single- $14,600. Married Filing Jointly- $29,200. Married Filing Separately- $14,600. Qualifying Surviving Spouse- $29,200. Head of Household- $21,900. With the new adjustment, it is estimated that the new standard deduction for individuals will be $15,000. Same for those who are Married Filing Separately. For Married Filing Jointly and Qualifying Surviving Spouses, it’d increase to $30,000, and Heads of Households would see an increase to $22,500.
It is quite important for business owners to be informed of these changes to upcoming tax brackets, as they could affect your financial situation. In order to fully understand how the new brackets may change your business plan, you need proactive tax planning. For further information on the necessity of tax planning, watch our latest YouTube video. To get in touch with a tax professional, feel free to call XQ CPA at the number below, or schedule a consultation online.
Phone: 832-295-3353
Online Booking: https://xqcpa-bookme.acuityscheduling.com/schedule.php
Sources:
Want to pay less taxes? Read XQ CPA's official tax planning guidebook! How to Grow Your Wealth Through Tax Planning.
Comments