As the calendar turns towards another tax season, millions are beginning to gear up for filing their taxes. Specifically, for the upcoming 2025 tax season, it’s important to focus on the financial activities from the tax year 2024. In Texas, residents benefit from the absence of state and income taxes, but they still need to pay attention to critical federal tax obligations that the Internal Revenue Service (IRS) governs.
IRS Adjustments for Tax Year 2024
Every year, the IRS makes inflation adjustments to various tax parameters, including the standard deduction, which is the portion of income not subject to tax, helping to reduce your taxable income. For the 2024 tax year, these adjustments were announced last year, highlighting the importance for all taxpayers, whether single or married, to review these changes carefully. The standard deduction amounts are crucial for taxpayers to ensure they’re applying the correct figures in their tax calculations.
Updated Deductions and Tax Brackets for 2025
Looking ahead, the IRS has also rolled out updates for the 2025 tax year, which affects tax filings starting in January 2026. These updates include an increase in the standard deduction across various filing statuses. Single filers and those married but filing separately will see their standard deduction increase to $15,000, which is an increase of $400. Married couples filing jointly will receive a $30,000 deduction, an increase of $800, and heads of households will get a $22,500 deduction, up by $600.
Detailed Overview of 2025 Tax Bracket Changes
The IRS has structured the tax brackets to accommodate various income levels differently, with incremental rates increasing with income. For the 2025 tax year, these brackets have been updated as follows:
- The highest bracket, 37%, applies to singles earning over $626,350 and married couples earning over $751,600.
- The next bracket, 35%, affects singles earning above $250,525 and married couples with more than $501,050.
- Following this, the 32% bracket includes singles who earn over $197,300 and married couples over $394,600.
- The rate drops to 24% for singles earning more than $103,350 and couples over $206,700.
- Further down, a 22% tax is levied on singles earning over $48,475 and couples more than $96,950.
- Lower income brackets incur a 12% and 10% tax rate, catering to those with modest incomes and ensuring a fair tax policy that adjusts to financial capability.
Texas-Specific Tax Considerations and Tax Bracket
While Texas residents do not pay state or income taxes, they are subject to other forms of taxation that can impact their overall tax burden. Texas has one of the highest sales and property tax rates in the country. The state sales and use tax stands at 6.25% and local taxing jurisdictions like cities and counties may add up to an additional 2% tax. This can bring the total sales tax rate to a maximum of 8.25%. Besides sales tax, Texans also face a variety of other taxes and fees, including but not limited to vehicle and hotel taxes, franchise taxes, and environmental fees. These additional charges are important for residents to consider when managing their finances and preparing for tax obligations.
