Your tax bracket determines how the federal government taxes different portions of your income. Minimizing your tax bill is easier when you understand this aspect of taxation — but since the IRS updates the brackets each year to account for inflation, it’s important to keep your knowledge up to date.

In this guide, we’ll break down how tax brackets work, what changes to watch out for in 2025, and how to use what you’ve learned to make smarter tax planning decisions.

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How federal tax brackets work

Tax brackets are ranges of income taxed at specific rates. There’s a common myth that if you move into a higher tax bracket because of an increase in income, the IRS will tax 100% of your pay at a higher rate. But the United States uses a progressive federal income tax system, meaning that only the portion of your income that falls within each bracket is taxed at that bracket’s rate. So earning more won’t suddenly erase your take-home pay.

To see which brackets apply to you, first determine your taxable income. Start with your total earnings for the year, including everything from wages and bonuses to investment income. Then, subtract any deductions or tax credits you’re eligible to claim. What remains is the amount the IRS uses to determine how much you owe.

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The IRS makes inflation adjustments each year. For single filers, the 2025 tax brackets are:

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• 10% on income up to $11,925 
• 12% on income between $11,925 and $48,475
• 22% on income between $48,475 and $103,350
• 24% on income between $103,350 and $197,300
• 32% on income between $197,300 and $250,525
• 35% on income between $250,525 and $626,350
• 37% on income over $626,350

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Your marginal tax rate is the rate applied to your last dollar of taxable income. For example, if you’re a single filer earning $50,000, your marginal rate is 22%. That rate matters because it tells you what tax rate will apply to any extra income, which can help you make more informed financial decisions.

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Your effective tax rate is the average rate you pay across all your taxable income. Let’s say your tax bill is $5,914 on $50,000 of taxable income — that works out to an effective tax rate of 11.83%. Knowing your effective tax rate gives you a better sense of how much of your income is actually going toward taxes. 

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For further help figuring out your marginal tax rate, effective tax rate, and tax bracket, reach out to your accountant.

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What are the 2025 federal tax brackets?

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You’ll use the IRS’ 2025 income tax brackets when you or your accountant file(s) your return in 2026. We already covered the single filer brackets when explaining how tax brackets work — now let’s look at the full breakdown by filing status.

Married filing jointly tax brackets

• 10%: Income up to $23,850
• 12%: Income between $23,851 and $96,950
• 22%: Income between $96,951 and $206,700
• 24%: Income between $206,701 and $394,600
• 32%: Income between $394,601 and $501,050
• 35%: Income between $501,051 and $751,600
• 37%: Income over $751,600

Married filing separately tax brackets

• 10%: Income up to $11,925
• 12%: Income between $11,926 and $48,475
• 22%: Income between $48,476 and $103,350
• 24%: Income between $103,351 and $197,300
• 32%: Income between $197,301 and $250,525
• 35%: Income between $250,526 and $375,800
• 37%: Income over $375,800

Head of household tax brackets

• 10%: Income up to $17,000
• 12%: Income between $17,001 and $64,850
• 22%: Income between $64,851 and $103,350
• 24%: Income between $103,351 and $197,300
• 32%: Income between $197,301 and $250,525
• 35%: Income between $250,526 and $626,350
• 37%: Income over $626,350

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Federal income tax deductions and credits

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Deductions and credits help shrink your taxable income, which means a smaller tax bill. When it’s time to file, U.S. tax law allows you to take either the standard or itemized deduction: 

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• Standard deduction: A fixed amount you subtract from your income, the standard deduction is the simplest option and works well for most people.
• Itemized deductions: If you spend a lot on expenses like mortgage interest, medical bills, or state and local taxes, itemizing your deductions might save you more than the standard deduction.
  
  

Unlike deductions, which lower your taxable income, credits reduce your tax bill directly, dollar for dollar. Some are refundable — meaning you can get money back even if you don’t owe taxes — while others simply lower your final bill. 

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Two of the most common (and helpful) tax credits are:

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• Earned Income Tax Credit (EITC): Offers extra relief for low to moderate-income workers.
• Child Tax Credit (CTC): Provides up to $2,000 per child, a portion of which may be refundable, depending on your income.

Common tax deductions

• Mortgage interest: If you’re a homeowner, you can deduct the interest you paid on your home during the tax year.
• Student loan interest: As with mortgage interest, student loan interest is tax-deductible. 
• Charitable donations: If you donated to qualified charities, you can deduct those donations from your taxable income. 

Personal exemptions: The Tax Cuts and Jobs Act (TCJA) of 2017 suspended the personal exemption, which allowed you to claim yourself as a dependent. But it will return in 2026 unless Congress extends TCJA.

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How can income tax brackets impact your investment strategy?

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Because your taxable income determines your tax liability, you may receive better after-tax returns with specific investments. 

If you earn enough to fall into the 35% or 37% tax brackets, for example, you might consider a tax-advantaged investment option like a qualifying annuity or a Roth IRA. But if you’re a lower-income earner, deferring taxes probably isn’t as big of a priority. 

Reduce your taxable income with annuities

Buying an annuity with pre-tax dollars can reduce your taxable income and could even lower your tax bracket. Connect with a Gainbridge financial advisor today to learn more about how an annuity can support your tax strategy while building long-term wealth.

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FAQ

Do federal income tax brackets include Social Security and Medicare taxes?

No, the IRS applies a strict rate to Social Security and Medicare. As of April 2025, it’s 6.2% for Social Security and 1.45% for Medicare. 

How do I know what tax bracket I’m in?

Your taxable income and filing status determine your tax bracket. To find yours, subtract all deductions and exemptions from your income and look for your bracket under your filing status. For example, if you’re a head of household with $90,000 in taxable income, you’re in the 22% bracket. 

Can income tax brackets change throughout the year?

The IRS typically sets income tax brackets for the calendar year, but changes in your own income or money you’ve placed in tax-advantaged investments could move you into a different bracket. 

How do income tax brackets affect retirees?

As a retiree, you may receive money from sources like Social Security, pensions, or income annuities that could put you in a higher tax bracket. 

Does my filing status affect my income tax rate?

Yes, the tax brackets for single taxpayers have the same thresholds as married taxpayers filing separately. All other statuses — married filing jointly, head of household, and qualifying surviving spouse — have different brackets.

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‍This communication is for informational purposes only. It is not intended to provide, and should not be interpreted as individualized investment, legal, or tax advice.