The IRS on Thursday announced larger inflation adjustments for fiscal year 2024, which could give Americans the opportunity to increase their take-home pay next year.
The higher limits for the federal income tax bracket and standard deductions are intended to prevent a phenomenon known as “bracket creep,” which occurs when taxpayers are pushed into higher income brackets even though their power purchasing power remains essentially unchanged due to high inflation.
The IRS makes these adjustments annually, but in times of inflation, the increases are more significant and impact taxpayers.
This year, tax brackets are rising by approximately 5.4%.
Higher thresholds at which tax rates take effect could mean savings for millions of workers at all income levels.
Here are the changes revealed by the IRS. Inflation-adjusted items will apply to tax year 2024, that is, returns filed in 2025.
Standard deduction
Most taxpayers claim the standard deduction, which reduces the amount of income you must pay taxes on.
The IRS announced larger inflation adjustments for fiscal year 2024 on Thursday.AP
It will increase to $29,200, up from $27,700 in 2024 for married couples filing jointly, representing a 5.4% increase. For individuals, the new maximum will be $14,600 by 2024, up from $13,850, the IRS said.
Heads of household will see their standard deduction increase to $21,900 in 2024, up from $20,800.
Tax categories for single people:
The IRS is increasing tax brackets by about 5.4% for single and married filers across different income spectrums. The top tax rate will remain 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
The IRS is increasing tax brackets by approximately 5.4% for both single and married taxpayers.Getty Images
Tax categories 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
The IRS also raised the thresholds for several other tax provisions, including the amount of the earned income tax credit, and families are now eligible to receive $7,830 if they have three or more qualifying children. That’s an increase of $7,430 for fiscal year 2023.
Employees can also contribute more to their health flexible spending accounts, with the maximum contribution increasing to between $150 and $3,200.
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Source: vtt.edu.vn