In 2025, changes to tax brackets could result in a slightly larger paycheck for you - here's what you need to know.

• Inflation adjustments to federal income tax brackets could result in a slightly larger paycheck for you in 2025.
• The change may be smaller than in previous years amid cooling inflation.
• To avoid a surprise tax bill, it's crucial to monitor federal and state tax withholdings throughout the year.

When your first paycheck of 2025 arrives, you may notice a slight increase in your earnings due to changes in your IRS tax bracket.

In 2025, the IRS raised the federal income tax brackets by approximately 2.8%, while the brackets increased by about 5.4% in 2024.

This year's yearly inflation adjustment is "less drastic" due to cooling inflation, according to Brian Long, senior tax advisor at Wealth Enhancement in Minneapolis.

The Consumer Financial Protection Bureau (CFPB) has finalized a rule to remove medical debt from credit reports. It's important to increase 401(k) contributions for 2025 to save more. After experiencing significant stock returns in 2024, it's time to adjust your investments.

In November 2024, the consumer price index, a crucial inflation indicator, increased by 2.7% compared to the previous year, decreasing from its recent high of 9.1% in June 2022.

Why your take-home pay could be higher

According to Long, if you begin 2025 with similar wages to 2024, your after-tax and benefit deduction compensation could be slightly higher, depending on your withholdings.

If your salary remains constant while tax brackets increase, you will be placed at a lower level on the income ladder, according to him.

Your taxable income is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income, and the federal income tax brackets determine how much you owe on each part of it.

In 2025, you may pay less in taxes even if you earn a little more than the previous year, as the standard deduction has increased, according to Long.

In 2025, married couples filing jointly will receive a larger tax break with a standard deduction of $30,000, an increase from $29,200 in 2024. Additionally, single filers will also benefit from a larger tax break with a standard deduction of $15,000, an increase from $14,600.

'It ends up nearly balancing out'

Although tax bracket changes, many Americans won't experience a pay increase due to rising prices for specific expenses, according to Sheneya Wilson, a CPA and founder of Fola Financial in New York.

"It ends up nearly balancing out," she said.

The cost of groceries, gasoline, and new cars increased in November, despite inflation slowing down, according to the Bureau of Labor Statistics.

It's crucial to monitor your state and federal income tax withholdings throughout the year, especially during significant income or life changes, according to Wilson.

Not withholding enough often results in taxes owed, while withholding too much typically leads to a refund.