The Internal Revenue Service (IRS) recently announced higher inflation adjustments for the 2024 tax year, potentially offering Americans an opportunity to increase their take-home pay. The adjustments aim to address the issue of “bracket creep,” where taxpayers are pushed into higher-income brackets due to inflation, despite their purchasing power remaining relatively unchanged. These adjustments, which occur annually, become more significant during periods of inflation. This year, the tax brackets are shifting higher by approximately 5.4%, potentially resulting in savings for millions of workers across all income brackets.
Adjustments to the Standard Deduction
The standard deduction, which reduces the amount of income subject to taxation, is claimed by the majority of taxpayers. For the 2024 tax year, the IRS has increased the standard deduction to help offset the impact of inflation. Let’s take a closer look at the adjustments:
For Married Couples Filing Jointly
Married couples filing jointly will see their standard deduction rise to $29,200, a 5.4% increase from the previous year’s $27,700. This adjustment allows couples to exclude a higher portion of their income from taxation, potentially resulting in savings.
For Individuals
Individual taxpayers will also benefit from an increased standard deduction. The maximum deduction for individuals in 2024 will be $14,600, up from $13,850 in the previous year. This adjustment aims to provide individuals with additional tax benefits and relief.
For Heads of Households
Heads of households, who often support dependents, will experience an increase in their standard deduction as well. In 2024, the standard deduction for heads of households will jump to $21,900, up from $20,800 in the previous year. This adjustment aims to alleviate the tax burden for individuals responsible for maintaining a household.
Tax Brackets for Single Individuals
The IRS has also made adjustments to the tax brackets for single individuals. These adjustments vary based on the taxable income levels. Let’s examine the tax brackets for single individuals for the 2024 tax year:
| Tax Rate | Taxable Income |
|---|---|
| 10% | Up to $11,600 |
| 12% | Over $11,600 |
| 22% | Over $47,150 |
| 24% | Over $100,525 |
| 32% | Over $191,950 |
| 35% | Over $243,725 |
| 37% | Over $609,350 |
These adjustments, with an average increase of approximately 5.4%, allow single individuals to potentially lower their tax liability and retain a higher portion of their income.
Tax Brackets for Joint Filers
Joint filers, typically married couples filing jointly, will also experience adjustments to their tax brackets for the 2024 tax year. These adjustments are designed to provide tax relief and ensure that joint filers are not unduly burdened by inflation. Here are the tax brackets for joint filers:
| Tax Rate | Taxable Income |
|---|---|
| 10% | Up to $23,200 |
| 12% | Over $23,200 |
| 22% | Over $94,300 |
| 24% | Over $201,050 |
| 32% | Over $383,900 |
| 35% | Over $487,450 |
| 37% | Over $731,200 |
These adjustments, reflecting an average increase of approximately 5.4%, allow joint filers to potentially reduce their tax burden and retain more of their hard-earned income.
Other Tax Provisions
In addition to adjustments to the standard deduction and tax brackets, the IRS has also made changes to several other tax provisions. These adjustments aim to provide taxpayers with additional tax benefits. Let’s explore some of the notable changes:
Earned Income Tax Credit (EITC)
The IRS has increased the thresholds for the Earned Income Tax Credit (EITC), a benefit for working individuals and families with low to moderate incomes. For the 2024 tax year, families with three or more qualifying children may be eligible to receive up to $7,830, an increase from the previous year’s $7,430. This adjustment allows eligible families to receive a higher credit, potentially resulting in greater financial support.
Health Flexible Spending Accounts (FSAs)
Employees can now contribute more to their Health Flexible Spending Accounts (FSAs) in the 2024 tax year. The maximum contribution limit for FSAs has increased by approximately $150 to $3,200. This adjustment enables individuals to set aside more pre-tax dollars to cover eligible medical expenses, providing them with potential tax savings.
