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Before I knew it, a third of the final month of the year had already slipped past. A restless flutter stirs in my chest. So much still remains to be done before the year draws to a close. First, I resolve to take stock of my finances as they stand now, preparing myself for the approaching tax season—already at the doorstep—and for shaping next year’s investments and portfolio with clearer intention. This month and in January, I’ll share a series of my reviews related to this. |
First, I checked key changes in the upcoming US individual income tax. The 2025 US individual income tax year (for taxes filed in early 2026) includes significant changes largely driven by new legislation (sometimes referred to as the "One Big Beautiful Bill (OBBB)") and annual inflation adjustments.
Here’s a summary of the most important 2025 US individual income tax changes:
🔑 Major Changes & New Deductions
Category | 2025 Tax Change Summary | Key Amounts (Income Phaseouts Apply) |
New Deduction for Seniors | A new, additional deduction for individuals aged 65 and older. This is on top of the standard deduction. | $6,000 for single filers (or $12,000 for a married couple where both qualify). |
New Overtime Deduction | Allows a deduction for qualified overtime pay that exceeds the regular rate of pay. | Up to $12,500 for single filers (or $25,000 for married couples filing jointly). |
New Car Loan Interest Deduction | Allows a deduction for interest paid on a loan used to purchase a new, qualified vehicle for personal use. | Up to $10,000 annually. |
New Tip Income Deduction | Allows a deduction for qualified tip income reported on a W-2 or 1099. | Up to $25,000 annually. |
SALT Deduction Cap | The cap on the State and Local Tax (SALT) deduction for itemizers is significantly increased (previously $10,000). | Capped at $40,000. |
Child Tax Credit (CTC) | The maximum credit per qualifying child is permanently increased and adjusted for inflation. | Up to $2,200 per qualifying child. |
🔢 Tax Brackets and Standard Deductions
The 7 federal tax rates are now permanent, and the income brackets are adjusted for inflation.
For Tax Year 2025- Rate | Single; Married Filing Separately | Married Filing Jointly; Surviving Spouses | For Heads of Households |
10% | $0 to $11,925 | $0 to $23,850 | $0 to $17,000 |
12% | $11,925 to $48,475 | $23,850 to $96,950 | $17,000 to $64,850 |
22% | $48,475 to $103,350 | $96,950 to $206,700 | $64,850 to $103,350 |
24% | $103,350 to $197,300 | $206,700 to $394,600 | $103,350 to $197,300 |
32% | $197,300 to $250,525 | $394,600 to $501,050 | $197,300 to $250,500 |
35% | $250,525 to $626,350 | $501,050 to $751,600 | $250,500 to $626,350 |
37% | $626,350 or more | $751,600 or more | $626,350 or more |
For Tax Year 2026- Rate | Single; Married Filing Separately | Married Filing Jointly; Surviving Spouses | For Heads of Households |
10% | $0 to $12,400 | $0 to $24,800 | $0 to $17,700 |
12% | $12,401 to $50,400 | $24,801 to $100,800 | $17,701 to $67,450 |
22% | $50,401 to $105,700 | $100,801 to $211,400 | $67,451 to $105,700 |
24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,775 |
32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,776 to $256,200 |
35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,201 to $640,600 |
37% | $640,601 or more | $768,701 or more | $640,601 or more |
Standard Deduction Amounts
Other Notable Changes
Permanent Tax Provisions: Many of the provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire after 2025, such as the lower individual tax rates and the elimination of personal exemptions, have been made permanent.
Retirement Contributions: Contribution limits for 401(k) and similar defined contribution plans have increased to $23,500 (plus a $7,500 catch-up for age 50+).
Adoption Credit: The maximum credit for qualified adoption expenses is increased, and up to $5,000 is now refundable.
529 Plans: The allowed uses for tax-exempt distributions from 529 plans have been expanded to include a larger list of K-12 expenses and certain postsecondary credentialing expenses.
If you need some help to understand how this tax bracket works and to learn ways to lower your taxes, check this article: https://www.fidelity.com/learning-center/personal-finance/tax-brackets
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