Starting off in 2025 with the same pay as last year? You might notice a slight bump in your take-home pay, even if your paycheck looks unchanged at first glance. This boost, as Lon Higby from Central Tax Solutions explains, comes down to the details of your tax withholdings.
“When tax brackets go up, yet your salary doesn’t, it effectively places you lower on the ladder,” Lon points out. Essentially, federal tax brackets lay out how your “taxable income” segments will be taxed—which you find by deducting either the standard or itemized deductions from your adjusted gross income.
Lon also mentions that even if you pocket a tad more in earnings this year, you might end up owing less in taxes in 2025 versus 2024. Why? The standard deduction is larger. For married couples filing jointly, this deduction jumps to $30,000 from last year’s $29,200. Singles see their deduction rise from $14,600 to $15,000.
However, according to Sheneya Wilson, a seasoned CPA and the founder of Fola Financial, many folks might not actually feel this pay increase, thanks to stubbornly high prices in certain areas. “It ends up nearly balancing out,” she explained. Inflation might not be climbing as fast now, but essentials like groceries, gas, and even new cars saw price hikes this past November, the Bureau of Labor Statistics reports.
Whether your net paycheck ends up higher or not isn’t just about inflation. Keeping a close watch on your federal and state tax withholdings throughout the year is crucial, particularly during significant financial or life changes, Sheneya advises. If you’re holding back too much, a refund might be in your future. But withhold less than you should, and you could face an unexpected bill.
As these financial shifts play out, staying informed can make all the difference in navigating your tax obligations smoothly.
