The Internal Revenue Service (IRS) has unveiled higher inflation adjustments for the 2024 tax year, signaling potential relief for Americans facing the impact of rising inflation. These adjustments aim to prevent “bracket creep,” a phenomenon pushing taxpayers into higher income brackets despite stagnant purchasing power due to inflation. Annually undertaken by the IRS, these adjustments become more significant during periods of inflation, impacting federal income tax brackets and standard deductions.
For the 2024 tax year, tax brackets are set to shift higher by approximately 5.4%, potentially resulting in increased take-home pay for taxpayers. The adjustments are applicable to returns filed in 2025. Key changes include:
Standard Deduction:
- Married couples filing jointly will experience a 5.4% increase in the standard deduction, rising to $29,200 from $27,700 in 2024.
- Individual taxpayers will see the maximum standard deduction increase to $14,600 for 2024, up from $13,850.
- Heads of households will witness a standard deduction rise to $21,900 in 2024, up from $20,800.
Tax Brackets for Single Individuals (Adjusted for a 5.4% Increase):
- 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 Joint Filers (Adjusted for a 5.4% Increase):
- 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:
- The earned income tax credit amount has been increased, with families now eligible to receive $7,830 if they have three or more qualifying children.
- The maximum contribution to health flexible spending accounts has risen by about $150 to $3,200.
These adjustments aim to mitigate the impact of inflation on taxpayers, offering potential relief through increased deductions and adjusted tax brackets.
IRS Makes Potentially Major Change To Tax Brackets
