Start from your situation
Employee on a paycheck
Your employer withholds tax for you. But what you actually owe is settled on your return, and several 2025 changes may lower it.
1. How your tax is figured
- Start with income: wages, tips, interest and side income (§ 61).
- Subtract the standard deduction, $16,100 single or $32,200 married filing jointly for 2026 (§ 63).
- Apply the layered rates, 10% up to 37% (§ 1).
- Subtract credits (below). What's left, compared with what was withheld, is your refund or your bill.
2. Credits worth checking
- Child tax credit: up to $2,200 per child under 17, partly refundable.
- Earned income tax credit: up to $8,231 for lower and moderate earners with children, $664 without.
3. New from 2025 to 2028
- Tips: tipped workers can deduct up to $25,000 of reported tips.
- Overtime: hourly workers can deduct the premium part of required overtime, up to $12,500 ($25,000 joint).
Both phase out above $150,000 of income ($300,000 joint), need a Social Security number valid for work, and leave payroll taxes unchanged.
4. Withholding is set on Form W-4
If you got a large bill or refund last year, update your W-4 with your employer. A big refund means you lent the government money interest-free during the year.
5. Selling your home?
Up to $250,000 of gain ($500,000 for couples) is tax-free if you lived there 2 of the last 5 years. See § 121.