How much money can you earn in 2025 before you get taxed?
Taxes may not be the sexiest news in the world, but when the IRS makes a move, you need to pay attention! This week, the IRS updated and released information related to tax brackets for 2025, and the standard deductions. Since you speak the language of money and will file a tax return, this is important information for you. The IRS is trying to tell you what percentage of your income will fall into which bracket and what you should expect as a tax liability this year.
Remember, we title taxes as our ‘Society Choice’ because your liability will depend on where you choose to live. The main pieces taken out of your Society Choice are Federal, we choose to live in this country, State, depending on which state you chose to live in, and FICA, a choice made because too many were not making it. All of these choices should give some thought as to how to prepare your Money Buckets accordingly.
For most people as W2 employees, our federal income taxes are automatically withheld from our paychecks. If you take a look at your pay stub, you’ll see that there was a withholding, and a corresponding amount. But if you are self-employed, a 1099 contractor, do gig work, freelance work, you need to set that money aside for yourself! No one is there to help you navigate or prepare for your Society Choice, so this can be extra important. Also want to point out that entrepreneurs pay BOTH sides of FICA totaling 15%!
The brackets remain marginal, meaning that you’re taxed progressively depending on how much money you make- ice cream scoops.
For 2025,
- The first bracket $11,925 you earn is taxed at 10%.
- Bracket between $11,296 and $48,475 is taxed at 12%.
- The highest bracket is for incomes greater than $626,350 — a subset of people that likely does not include you or me. Earnings over that amount are taxed at 37%.
One thing we want to clear up in these brackets is that you’ll never make LESS money if your salary goes up, even if you get bumped into a higher tax bracket. The government doesn’t want to dissuade you from earning more, so your earnings are taxed progressively, and that means what falls into one bracket is not affected by what falls into the next. We all pay the SAME on the first dollars we make. It is only when you earn more that you are taxed more on the dollars in the higher bracket.
Now, we know not all your income is taxed and we can take deductions, in 2025 the standard deduction went up to $15,000 for single taxpayers. So, if you earned, say $11,000, and the standard deduction is $15,000, you wouldn’t owe anything, and could actually see a refund of several thousand dollars.
Of course, everybody’s situation is different, and depending on how much money you make, where you live, or the different ways you create money, it may be a good idea to talk with an accountant to see what the best way to file is. You can also ask if it is beneficial to take the standard deduction, or to start itemizing, I know, accountant-talk!
Again, this may not be an update you were looking forward to, but we all pay taxes. Taxes fund our government and the many, many programs on a national scale. You may not like it, but it’s part of your choice to live in the United States society.
Just remember to take your Society Choice into consideration, especially if you’re doing freelance or gig work. The last thing you want is to file your tax return and expect to get a refund, only to find out that you owe more money!
