IRS sets new tax brackets, standard deduction for 2024
FILE - IRS 1040 Individual income tax forms for 2021 arranged in Louisville, Kentucky, U.S., on April 12, 2022. Photographer: Luke Sharrett/Bloomberg via Getty Images
The IRS on Thursday announced higher inflation adjustments for the 2024 tax year, potentially giving Americans a chance to increase their take-home pay next year.
The higher limits for the federal income tax bracket and standard deductions are intended to avoid a phenomenon known as "bracket creep," which happens when taxpayers are pushed into higher-income brackets even though their purchasing power is essentially unchanged due to high inflation.
The IRS makes such adjustments annually, but in times of inflation, the increases are more significant and impactful for taxpayers.
This year, the tax brackets are shifting higher by about 5.4%.
The higher thresholds where tax rates take effect could mean savings for millions of workers across all income brackets.
IRS PLANS TO TEST FREE TAX-FILING PILOT PROGRAM IN 13 STATES NEXT YEAR
Here are the changes unveiled by the IRS. The inflation-adjusted elements will apply to the 2024 tax year, meaning returns filed in 2025.
Standard deduction
The standard deduction, which reduces the amount of income you must pay taxes on, is claimed by a majority of taxpayers.
It will rise to $29,200, up from $27,700 in 2024 for married couples filing jointly, amounting to a 5.4% bump. For individuals, the new maximum will be $14,600 for 2024, up from $13,850, the IRS said.
Heads of households will see their standard deduction jump to $21,900 in 2024, up from $20,800.
Tax brackets for single individuals:
The IRS is increasing the tax brackets by about 5.4% for both individual and married filers across the different income spectrums. The top tax rate remains 37% in 2024.
- 10%: Taxable income up to $11,600
- 12%: Taxable income over $11,600
- 22%: Taxable income over $47,150
- 24%: Taxable income over $100,525
- 32%: Taxable income over $191,950
- 35%: Taxable income over $243,725
- 37%: Taxable income over $609,350
YELLEN SAYS REPUBLICAN CUTS TO IRS FUNDING WOULD BE 'DAMAGING AND IRRESPONSIBLE'
Tax brackets for joint filers:
- 10%: Taxable income up to $23,200
- 12%: Taxable income over $23,200
- 22%: Taxable income over $94,300
- 24%: Taxable income over $201,050
- 32%: Taxable income over $383,900
- 35%: Taxable income over $487,450
- 37%: Taxable income over $731,200
Other tax provisions
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The IRS also increased the thresholds for several other tax provisions, including the earned income tax credit amount, with families now eligible to receive $7,830 if they have three or more qualifying children. That is up from $7,430 for tax year 2023.
Employees can also contribute more to their health flexible spending accounts, with the maximum contribution rising by about $150 to $3,200.