Tax Rates and Brackets for 2025
Not to be confused with tax form preparation, income tax planning is the analysis of a financial situation to determine how after-tax wealth can be maximized.
An essential first step is determining the applicable tax bracket, also known as the marginal tax rate. The table below shows the newly revised tax rates for 2025.
Rate | Individuals | Married Filing Jointly |
|---|---|---|
10% | Up to $11,925 | Up to $23,850 |
12% | $11,926 to $48,475 | $23,851 to $96,950 |
22% | $48,476 to $103,350 | $96,951 to $206,700 |
24% | $103,351 to $197,300 | $206,701 to $394,600 |
32% | $197,301 to $250,525 | $394,601 to $501,050 |
35% | $250,526 to $626,350 | $501,051 to $751,600 |
37% | Over $626,350 | Over $751,600 |
The standard deduction is now $15,000 for individuals and $30,000 for married couples.
Capital Gains Rates for 2025
Here are the rates for long-term capital gains (assets held for more than a year) and qualified dividends. Please note that the Affordable Care Act 3.8% investment income tax remains in place, and state taxes are also a consideration when selling assets. It is also important to note that capital gains stack on top of ordinary income. For example, a single taxpayer with $100,000 of ordinary taxable income will pay 15% on long-term capital gains.
Rate | Individuals | Married Filing Jointly |
|---|---|---|
0% | Up to $48,350 | Up to $96,700 |
15% | $48,351 to $533,400 | $96,701 to $600,050 |
20% | Over $533,400 | Over $600,050 |
How We Increase Your Tax Efficiency
Here are some of the methods used by Clarity to increase the tax-efficiency of our clients’ portfolios.
- Advising on account types to maximize current tax deductions or future tax-free income.
- For clients in high marginal tax brackets, municipal bond funds may be used in taxable accounts.
- Tax management of equities is implemented by using only low turnover funds. Furthermore, foreign equities may be limited to holdings that pay qualified dividends.
- While some advisors use asset location as a justification to have retirement accounts hold only bonds and real estate investment trusts, we do not take this approach because we consider a small gain in tax efficiency not to be worth the cost of having drastically different returns across different accounts. Also, having only equities in taxable accounts can be frustrating for older investors who find that there is a cost to withdrawing their funds (either capital gains in taxable accounts or ordinary income tax in non-Roth retirement accounts).
At Clarity, we will work with your tax professionals to ensure that they have all the information they need from us to properly complete your taxes. Likewise, we will obtain from them the information we need to efficiently trade your accounts such as marginal tax rates and loss carryforwards.