These new tax brackets will provide a potential tax break to eligible taxpayers when they file their 2024 taxes in early 2025.
The IRS is set to roll out new tax brackets in 2024, aiming to ease the tax burden on a variety of income groups while keeping pace with inflation
The IRS has announced an upward adjustment of the tax brackets by 5.4%, a move based on a formula linked to the consumer price index, which tracks the costs of consumer goods and services. Last year, in response to high inflation, the IRS expanded the new tax brackets by an unprecedented 7%.
This annual adjustment of tax brackets is part of the IRS’s strategy to counteract bracket creep, where individuals may find themselves pushed into higher tax brackets due to inflation or wage increases, despite maintaining their standard of living.
These new tax brackets can also help workers by allowing more of their income to fall into a lower tax bracket, thus reducing their tax liability
The 2017 Tax Cuts and Jobs Act established seven federal income tax rates, ranging from 10% to 37%. Additionally, in 2024, the standard deduction is set to increase by 5.4%. For married couples who file jointly, it will go up to $29,200, an increase of $1,500 from the previous year. Single taxpayers and married individuals who file separately will have a standard deduction of $14,600, a $750 increase, while heads of households will see their standard deduction rise to $21,900, an increase of $1,100.
These alterations to the new tax brackets and deductions will significantly affect the effective tax rates of taxpayers, which could be notably lower than their marginal tax rates. These adjustments in new tax brackets and standard deductions demonstrate the IRS’s commitment to adapting to the changing economic landscape and offering relief to American taxpayers.
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