There are several 2025 tax law changes going into effect that are impacting millions of Americans. Staying ahead of these updates can help you better plan your tax strategy and keep more of what you earn.  

NOTE: These changes apply to the 2025 tax year, meaning they will apply to the taxes you file in April 2026.  

Income Thresholds Are Changing 

This year, the federal income tax brackets are going to be adjusted for inflation.  

The brackets themselves are not changing (they will continue to be from 10% to 37%), but the income thresholds for each level are changing. 

The new 2025 federal income tax brackets are as follows:  

• 10% federal income tax bracket for 2025 
  • $0 to $11,925 for single filers 
  • $0 to $23,850 for married filing jointly 
  • $0 to $17,000 for heads of household 

• 12% federal income tax bracket for 2025 
  • $11,926 to $48,475 for single filers 
  • $23,851 to $96,950 for married filing jointly 
  • $17,001 to $64,850 for heads of household 

• 22% federal income tax bracket for 2025 
  • $48,476 to $103,350 for single filers 
  • $96,951 to $206,700 for married filing jointly 
  • $64,851 to $103,350 for heads of household 

• 24% federal income tax bracket for 2025 
  • $103,351 to $197,300 for single filers 
  • $206,701 to $394,600 for married filing jointly 
  • $103,351 to $197,300 for heads of household 

• 32% federal income tax bracket for 2025 
  • $197,301 to $250,525 for single filers 
  • $394,601 to $501,050 for married filing jointly 
  • $197,301 to $250,500 for heads of household 

• 35% federal income tax bracket for 2025 
  • $250,526 to $626,350 for single filers 
  • $501,051 to $751,600 for married filing jointly 
  • $250,501 to $626,350 for heads of household 

• 37% federal income tax bracket for 2025 
  • $626,351 or more for single filers 
  • $751,601 or more for married filing jointly 
  • $626,351 or more for heads of household 

NOTE: Many taxpayers get concerned that earning more income will greatly increase their federal tax burden by “pushing them into the next bracket.” However, moving into the next bracket does not impact all of your income, but rather the income made over the threshold.  

For example, if a single person made $50,000 in 2025, then the first $11,925 will be taxed at 10%. The next $36,549 (from $11,926 to $48,475) will be taxed at 12%, and only the last $1,524 (from $48,476 to $50,000) will be taxed at 22%. 

While there may be income cutoffs for certain state and federal benefits, when it comes to federal income taxes, there is no reason to shy away from accepting opportunities to earn more. 

The Standard Deduction is Changing 

The standard deduction will be increasing in 2025. The new rates are as follows: 

• $15,750 for single filers 
• $31,500 for married filing jointly 
• $23,625 for heads of household 

NOTE: Many people spend time itemizing so they can get the best deduction possible. However, with these raises in the standard deduction, itemizing will probably not make sense for the majority of everyday filers, unless you have a business or very high-deductible expenses for the 2025 tax year.  

2025 Tax Law Changes: Updates from the One Big Beautiful Bill 

The One Big Beautiful Bill is implementing several 2025 tax law changes. Here are just a few of the major provisions going into effect.  

NOTE: This is not a comprehensive overview of the One Big Beautiful Bill. We have more extensive pieces on this legislation, including a blog (which you can find here) and a video (which you can find here).  

No tax on tips. 

While this is good news for people who work in tips-based industries, it’s not exactly what it sounds like. “No tax on tips,” does not apply to all tips, and there are limits.  

Firstly, this change will only be in effect from 2025 through 2028. It also only applies up to $25,000 in tips annually. Anything over that will be subject to taxes. 

Businesses are not allowed to give employees “freebies” by classifying regular income as tips. To qualify for this benefit, taxpayers must work in an industry where tips are a normal and expected part of compensation (like waitstaff). Other exceptions apply as well, including income caps. 

NOTE: For more information on the 2025 tips tax changes, you can visit the IRS website here. 

No tax on overtime.  

Like “no tax on tips,” this provision of the One Big Beautiful Bill does not apply to all overtime, and there are limits here as well.  

Firstly, this change also only applies for 2025 through 2028. Furthermore, it only applies to the pay that exceeds an employee’s regular rate of pay (generally the “half” in “time and a half”).  

So, for example, if an employee makes $18 an hour and works 4 hours of overtime for $27 an hour ($18 + $9) making $108 extra for the week, only $36 ($9 times 4) would be tax-free if they were accrued under the set thresholds.  

For single filers, the maximum annual overtime deduction is $12,500.  For married couples filing jointly, the limit is $25,000. There is also an overall income limit set to receive this benefit. 

NOTE: For more information on the 2025 overtime tax changes, you can visit the IRS website here. 

Senior deductions.  

The last of the changes we will cover from the One Big Beautiful Bill (although there are more) are the senior bonus deductions.  

From 2025 through 2028, seniors (over the age of 65) can qualify for an additional deduction of $6,000 per person. So, for a married couple where both people are over the age of 65, you can claim an additional $12,00 deduction. 

You can get this benefit whether you itemize or take the standard deduction. 

Income limits do apply for seniors with a modified adjusted gross income of over $75,000 ($150,000 for joint filers) as well as other criteria.  

NOTE: For more information on the 2025 senior bonus deductions, visit the IRS website here. 

Smart Tax Tips 

If you need to file an extension, you can, but your taxes will still be due on April 15^th, 2026, if you owe. Paying your taxes after the due date results in late payment penalties and interest added to what you owe. 

Gathering your documents early (W-2s, 1099s, receipts) can help you make sure your tax filing stays on track.  

Whether you’re able to do your own taxes will depend heavily on the complexity of your filing status. With so many 2025 tax law changes going into effect, the complexity of filing will be increasing for many Americans.  

If you only have one or two W-2s to file and plan to take the standard deduction, you can probably handle filing on your own.  

However, if you own a business, engage in regular contracting, have switched jobs multiple times, or otherwise have a reason to expect filing to be complicated, it may be wise to involve a tax professional to make sure everything is correct.  

If that’s you, we can help.  

At PaulHood we don’t just file your taxes once a year and move on. We provide year-round, proactive guidance to help you keep more of what you earn at every stage. Our team of experts has served both businesses and individuals for over 30 years, identifying key savings opportunities and reducing the overall tax burdens of our clients.  

You can reach out to our team here to learn more about our services and offerings.