Amid discussions surrounding a potential government shutdown, the IRS quietly announced new tax brackets that will affect every taxpayer in the United States. These adjustments, which are made each year to account for inflation and are based on the Consumer Price Index (CPI), typically fly under the radar, and this year is no exception.
The adjustments for the 2025 tax year reflect an average increase of approximately 2.8% in federal income tax brackets. This contrasts significantly with the adjustments made in previous years, where tax brackets were raised by 7% in 2023 and 5.4% in 2024, largely to cope with inflation stemming from the pandemic.
The revised tax brackets for individual filers for the upcoming year are as follows:
- 10% tax bracket: $0–$12,400
- 12% tax bracket: $12,401–$50,400
- 22% tax bracket: $50,401–$105,700
- 24% tax bracket: $105,701–$201,775
- 32% tax bracket: $201,776–$256,225
- 35% tax bracket: $256,226–$640,600
- 37% tax bracket: $640,601 and up
Notably, the upper limit for the lowest tax bracket has increased from $11,925 in 2025 to $12,400 in 2026, marking a 3.9% increase. Conversely, the threshold for the highest tax rate has moved from $626,351 to $640,601, which is a more modest increase of 2.3%. These smaller increases could prompt higher-income earners to seek alternative tax advantages when filing their returns.
One strategy available for tax optimization is investing in commercial real estate, which allows individuals to benefit from depreciation and various cost segregation tax benefits, potentially lowering taxable income. Additionally, a 1031 exchange can enable investors to roll over profits from one property to another without immediate tax implications.
Historically, access to the expansive $22.5 trillion commercial real estate sector was limited to a select group of affluent investors. However, First National Realty Partners (FNRP) now opens this investment opportunity to accredited investors, allowing them to stake a claim in properties anchored by national brands such as Whole Foods, Kroger, and Walmart, with a minimum investment of just $50,000. This investment model leverages Triple Net (NNN) leases, thus minimizing concerns about tenant-related costs affecting returns.
For those interested in the new tax brackets relating to married couples filing jointly, here are the updated thresholds:
- 10% tax bracket: $0–$24,800 (up from $23,850)
- 12% tax bracket: $24,801–$100,800
- 22% tax bracket: $100,801–$211,100
- 24% tax bracket: $211,401–$403,550
- 32% tax bracket: $403,551–$512,450
- 35% tax bracket: $512,451–$768,700
- 37% tax bracket: $768,701 and up (up from $751,601)
These new brackets provide taxpayers with insights into their potential tax liabilities for the approaching year. However, it’s essential to remember that income thresholds are only one facet of the overall tax picture, and working with a professional tax advisor can aid in more comprehensive planning.
In addition to these income adjustments, the IRS has enhanced deductions across the board, now set at:
- $16,100 for single filers and married individuals filing separately
- $24,150 for heads of households
- $32,200 for married couples filing jointly
Moreover, the earned income tax credit for families with at least three children will increase from $8,046 for the current tax year to $8,231 in 2026. A new senior tax deduction of $6,000 has also been introduced, offering older Americans additional financial relief.
While the modest increases in tax brackets may not significantly alleviate the pressures of wage growth and rising costs experienced by many, the new thresholds and broader deductions provide a bit more flexibility for taxpayers as they prepare for the upcoming tax season.
