Despite tax bracket changes, many Americans won't feel the pay increase amid elevated prices for certain expenses, said Sheneya Wilson, a CPA and founder of Fola Financial in New York.
Your paycheck could be slightly bigger in 2025 due to inflation adjustments to federal income tax brackets.
The change may be smaller than in previous years amid cooling inflation.
Regardless, you should monitor federal and state tax withholdings throughout the year to avoid a surprise tax bill.
As the first paycheck of 2025 hits your bank account, it could have slightly more money due to IRS tax bracket changes.
The IRS in October announced the federal income tax brackets for 2025, which raised each income threshold by roughly 2.8%. By comparison, the brackets increased by about 5.4% in 2024.
The yearly inflation adjustment is "much less drastic this year" amid cooling inflation, said certified public accountant Brian Long, senior tax advisor at Wealth Enhancement in Minneapolis.
The consumer price index, a key inflation measure, rose 2.7% in November 2024 compared with the previous year, down from a recent peak of 9.1% in June 2022.
Why your take-home pay could be higher
If you're starting 2025 with wages similar to your 2024 wages, your take-home pay — or compensation after taxes and benefit deductions — could be a little higher, depending on your withholdings, according to Long.
"When all the tax brackets go up, but your salary stays the same, relatively, that puts you on a lower rung of the ladder," he said.
The federal income tax brackets show how much you owe on each part of your "taxable income," which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
Article Despite tax bracket changes, many Americans won't feel the pay increase amid elevated prices for certain expenses, said Sheneya Wilson, a CPA and founder of Fola Financial in New York. published on personalfinancebytes.com
