IRS announces tax brackets for 2024
In 2024, Americans will see new tax brackets.
Cheddar
The Internal Revenue Service has announced that income tax brackets and standard deductions will change for the 2024-2025 season.
The IRS released the information Thursday in its annual inflation adjustment report, revealing a 5.4% increase in income thresholds to meet each new income limit.
The IRS makes these changes annually, using a formula based on the Consumer Price Index, to combat inflation and prevent “bracket creep,” which occurs when inflation pushes taxpayers into a higher price bracket without any increase a real increase in income or purchasing power.
While this increase is smaller than the historic increase of 7% last year, it is still more significant than times in the past when inflation was below the current 3.7%.
The Tax Cuts and Jobs Act of 2017 establishes seven federal income tax rates that will be applied gradually. This means that the more you earn, the higher the percentage of taxes you pay on your income. The rates are currently 10%, 12%, 22%, 24%, 32%, 35% and 37%.
For 2024, the lowest tax rate of 10% applies to individuals with taxable income of up to $11,600 and co-filers up to $23,200. The top rate of 37% applies to individuals earning more than $609,350 and married couples filing jointly earning $731,200 or more.
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Standard deductions for 2024
- The standard deduction for the 2024 tax year increases to $29,200 for married couples filing jointly, an increase of $1,500 from $27,700 in the 2023 tax year.
- The standard deduction for single taxpayers is $14,600, an increase from $13,850 in 2023.
- Heads of households will see an increase of $1,100 to $21,900, compared to $20,800 in 2023.
Tax brackets for people filing as single filers for 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
Tax brackets for co-applicants in 2024
- 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
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2024 Adjustments for Social Security, FSA, 401(k), and IRA Contributions
- Starting in January, Social Security benefits will increase by 3.2%, or more than $50 per month.
- The limit for contributing to an FSA in 2024 will increase from $3,050 to $3,200.
- Employee contributions to 401(k), 403(b) and most 457 plans are now capped at $23,000, up from the $22,500 limit in 2023. Annual contributions to an IRA are now capped at $7,000 -Dollars (previously $6,500).