As we are approaching the end of December in 2024, taxpayers across the United States are gearing up to file their taxes for the year. Let’s take a look back at the federal income tax brackets and standard deductions for 2024 as previously announced by the Internal Revenue Service (IRS). The IRS adjusts over sixty tax provisions annually based on inflation pressures.
The IRS adjusts tax brackets each year to offset the impact of inflation. This helps prevent “bracket creep,” where taxpayers are pushed into higher tax brackets due to cost-of-living adjustments or raises, even if their actual standard of living has not risen due to inflation. However, if the tax bracket thresholds are raised, some taxpayers may drop into lower tax brackets, reducing their overall tax liabilities.
According to the IRS’s prior announcement, tax brackets for 2024 will increase by 5.4%, marking the largest adjustment in history.
The federal standard deduction amounts have also been raised. For individuals filing singly or as married individuals, the standard deduction has been increased to $14,600, a $750 raise from the 2023 tax year; for married couples filing jointly, it will rise to $29,200, up by $1,500 from the previous tax year; for heads of households, the standard deduction for 2024 has been increased to $21,900, a $1,100 increase.
Currently, the U.S. federal income tax system consists of seven tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Each rate applies to a certain range of taxable income, known as tax brackets.
Here are the tax rates for the seven tax brackets for the 2024 tax year:
– 10%: Income up to $11,600 (up to $23,200 for married couples filing jointly)
– 12%: Income over $11,600 (over $23,200 for married couples filing jointly)
– 22%: Income over $47,150 (over $94,300 for married couples filing jointly)
– 24%: Income over $100,525 (over $201,050 for married couples filing jointly)
– 32%: Income over $191,950 (over $383,900 for married couples filing jointly)
– 35%: Income over $243,725 (over $487,450 for married couples filing jointly)
– 37%: Income over $609,350 (over $731,200 for married couples filing jointly)
These adjustments to tax brackets and standard deductions aim to reflect changes in the cost of living and ensure a fair distribution of tax burden among different income levels. Taxpayers are encouraged to review these updates carefully as they prepare to file their taxes for the 2024 tax year.