A Guide to Taxes in 2025 (Plus Free Tax Table Download!)

While taxes may not be the most exciting topic, understanding how taxes work and what your tax liabilities may be are essential for effective financial planning. Whether you're preparing for retirement, managing investments, or simply aiming to minimize your tax liability, knowing your income brackets, the current capital gains rates, and contribution limits each year is crucial.

Below, download your complimentary 2024-2025 Tax Table. Then, follow along in this guide as we break down key components, including standard deductions, IRA contribution limits, and phaseouts for retirement accounts. With this information, you will be equipped to make informed decisions and maximize your tax savings.

 

Download your complimentary 2024-2025 Tax Table

 
 

Your Income Tax Bracket for 2025

Your taxable income is typically one of the most significant drivers to your total tax liability year to year. Not only does this determine your tax bracket, but it also factors into your capital gains rate and net interest income tax. Additionally, it plays a role in your ability to utilize certain investment vehicles.

One thing that is often misunderstood with the current tax brackets is that our tax system works as a progressive tax. This means that for joint filers who make $210,000 of taxable income in one year, not every penny of that $210,000 is taxed at the 24% bracket that you fall into. Rather, the first $23,850 is taxed at 10%, then the next $73,100 (up to $96,950) is taxed at the 12% rate, and so on. This puts a little less pressure on taxable income amounts from the tax bracket perspective where if someone falls just one dollar above a threshold, they do not suddenly have a much higher total tax rate and bill.

As you follow along the chart in the tax table, you will see the calculations that give you a sense of the total tax liability you may expect depending on which bracket you fall in to. If you divide this total tax liability by your total taxable income, you will get what is called your effective tax rate, which is a blend of the tax rates you see in the chart and, most of the time, will come out with a number entirely different from any given bracket percentage. The marginal tax rate would be the additional tax percentage paid on every dollar earned as income above each threshold. From the example earlier, it would suggest every additional dollar earned for this family would come with a marginal tax rate of 24% up until the next bracket at $394,600.

Calculating Your Capital Gains Tax Rates in 2025

Capital gains tax rates are often overlooked. Although most may fall into the 15% capital gains tax bracket, it is important to know that some may actually qualify for a 0% capital gains tax and others may be subject to the 20% level. This rate is based on your total taxable income, which generally includes capital gains, dividends, employment income, and more, and increases depending on where your total income falls in that tax year.

Please do keep in mind that short-term capital gains are treated, and therefore taxed, as ordinary income.  Any short-term gains will follow the income tax brackets mentioned above. That said, long-term gains on investments held for over a year are taxed at capital gains rates.

This is why strategic tax planning is so important even within the investment strategy itself, as transactions with investments outside of retirement accounts may come with tax implications. It is also important to note that assets sold at a loss can be captured as “capital losses” and those losses may be used to offset any gains in the same tax year.

Although this covers the capital gains tax itself, higher income earners do also need to be aware of the Net Investment Income Tax (NIIT) which is an additional 3.8% rate for married filing jointly with modified adjusted gross income (MAGI) over $250,000 and single filers over $200,000. 

The 2025 Standard Deduction

The standard deduction has increased slightly in 2025 and is now $30,000 for joint returns and $15,000 for single filers.

It is important to note that these higher standard deduction levels began in 2017 as part of the Tax Cuts and Jobs Act (TCJA) which is to sunset at the end of 2025. That said, the TCJA was set in motion by the previous Trump administration, so it is likely this may be extended or a new package introduced with many similarities.

Annually, your tax circumstances are run as part of filing your taxes, whether you prepare them yourself, with the help of a CPA, or via tax software. Based on your tax scenario in that year, your circumstances identify what would qualify for itemized deductions versus what you would receive with the standard deduction. If your itemized deductions add up to over $30,000 for joint filers or $15,000 for single filers, you would utilize the itemized deductions, of course, for a more favorable tax scenario. On the other hand, if these itemized deductions add up to a lower amount than the standard deductions, you would take the standard deduction to reduce your taxes.

Many who were itemizing prior to the Tax Cuts and Jobs Act have realized the higher standard deduction is much more beneficial today, so many choose not to itemize their deductions and opt for the higher standard deduction. This does not mean the tax benefit has been lost, it simply means it takes a much higher itemized deduction threshold to see a benefit over the higher standard deduction.

As a result, it has become more typical that those making charitable contributions are not receiving the additional tax benefits they once experienced. This is where bunching gifts and other charitable giving strategies may help to reduce taxation as effectively as possible, even with the higher standard deduction.

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2025 Retirement Contribution Limits and Catch Ups

Each calendar year, the IRS adjusts contribution limits for retirement plans to account for inflation. Some of the most notable changes for 2025 include 401(k)/403(b), IRAs, and HSAs. Below, we cover each of these plan types in more detail.

2025 Retirement Plan Limits for 401(k)/403(b)

The limit for 401(k) and 403(b) plans is $23,500 for 2025, up from $23,000 last year. If you are age 50 or older, you also are allowed a “catch-up” contribution to encourage additional savings, which is $7,500 again this year for a total maximum contribution of $31,000. However, new this year is also an additional “catch up” provision for those ages 60, 61, 62, or 63, are allowed a total “catch up” contribution of $11,250.

The other adjustment is to total contributions. The adjustment to the TOTAL limit for these plans has increased to $70,000 ($77,500 including catch up contributions) in 2025 from $69,000 ($76,500 including catch up contributions) in the previous year. These amounts include employer contributions, after-tax contributions, etc., and are the absolute maximum amount that can be contributed to these plans in a given year.

2025 Retirement Plan Limits for Traditional IRAs and Roth IRAs

In 2025, the IRS did not change the contribution limit for IRAs. In 2025, savers can contribute $7,000, the same amount as in 2024. There is also an additional $1,000 “catch-up” contribution available to those 50 and older for a total of up to $8,000. Please keep in mind that IRAs and Roth IRAs have income considerations, which have been adjusted for 2025, so be sure to review these income thresholds before making contributions.

2025 Retirement Plan Limits for HSAs

In 2025, the family plan maximum contributions increased $250 for a total of $8,550. Individuals also increased by $150 to a level of $4,300 for 2025.

For even more contribution limits, including employee and business plans such as SEP IRAs and SIMPLE IRAs, visit our guide to 2025 contribution limits!

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IRA Income Phaseouts in 2025

For higher earners, the IRS may not allow you to contribute to IRA accounts. These vehicles were designed to help savers with a lower income take advantage of tax deferred and tax-free growth. For higher earners, however, the tax code attempts to prohibit those from saving towards these accounts.

In 2025, joint filers making over $126k begin to “phase out” of eligibility to receive the tax deduction on traditional IRA contributions. This means the contribution amount you are eligible to deduct may be prorated (see contribution limits above) and those joint filers with AGI over $146k may be completely ineligible. For single filers, that range is $79k-$89k.

Separately, joint filers making over $236k begin to phase out of eligibility to contribute to a Roth IRA at all and are completely ineligible with AGI above $246k. For single filers, this range is $150k-$165k.

That said, there may be strategic ways to reduce AGI to allow eligibility. Separately, exploring options such as backdoor Roth IRA contributions with your financial planner will  allow you to still save into these vehicles where appropriate.

Navigating the complexities of the tax system can feel overwhelming, but understanding these essential components including your income brackets, capital gains rates, deductions, and contribution limits can help you plan more effectively. By staying informed about current thresholds and limits, you can reduce your tax liability and optimize your financial strategy. Be sure to download our complimentary 2024-2025 Tax Table to discover the latest figures for your specific tax scenario.

Whether you are saving for retirement or managing your investments, using these tables as a guide will ensure you’re making the most of opportunities within the tax code. If you have any questions about how these rates and limits may apply to you, please reach out to a member of the Mainsail advisory team below for a complimentary consultation!

Advisory services offered through Mainsail Financial Group, LLC, a Registered Investment Adviser. For informational purposes only, not intended as tax advice. Please consult a tax professional when appropriate.

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Brandon Steele