American taxpayers may be in for larger paychecks in 2024, thanks to the Internal Revenue Service’s (IRS) annual adjustments to the tax code. The IRS, combating the phenomenon known as ‘bracket creep,’ has revised the numbers to account for inflation, potentially allowing individuals to take home more money even with stable salaries. These changes, set to impact tax filings in 2025, are designed to prevent individuals from being pushed into higher tax brackets due to inflationary pressures.
Tackling Bracket Creep
The IRS’s fight against ‘bracket creep,’ wherein inflation could push individuals into higher tax brackets, has led to adjustments in the tax code. The agency’s annual revisions aim to counteract the adverse effects of inflation on tax deductions, ensuring that individuals do not face higher taxes simply due to decreasing deduction values.
One significant change involves the standard deduction, the amount subtracted from taxable income for those who choose not to itemize specific deductions. The standard deduction is set to rise by $750, reaching $14,600 for an individual filing taxes in early 2025. These adjustments contribute to maintaining the actual value of deductions in the face of inflation.
Understanding one’s tax bracket, determined by the range of taxable income, is crucial for assessing the impact of these changes. The U.S. employs a progressive tax system, where higher income results in higher tax rates. For the 2024 tax year, the brackets have been adjusted, potentially resulting in individuals falling into lower tax brackets and paying less in taxes, especially if their wages have not kept pace with inflation.
READ ALSO: Insufficient Retirement Funds: Side Gig Now Earns Double My 9 to 5 Salary
Marginal Tax Rates for 2024
After deductions, the marginal tax rates for 2024 are as follows:
- 37% for incomes over $609,350 ($731,200 for married couples filing jointly).
- 35% for incomes over $243,725 ($487,450 for married couples filing jointly).
- 32% for incomes over $191,950 ($383,900 for married couples filing jointly).
- 24% for incomes over $100,525 ($201,050 for married couples filing jointly).
- 22% for incomes over $47,150 ($94,300 for married couples filing jointly).
- 12% for incomes over $11,600 ($23,200 for married couples filing jointly).
- 10% for incomes of $11,600 or less ($23,200 for married couples filing jointly).
While these changes will impact the 2024 tax year, the upcoming 2023 filing season is approaching, with the IRS announcing a start date of January 29, 2024. Taxpayers are urged to consider how these adjustments might affect their tax liabilities. Other tax code changes, such as rebates for electric vehicle purchases and expanded child tax credits in certain states, are noteworthy factors in the evolving tax landscape.
READ ALSO: Fans Rally to the Rescue: Willie Nelson’s Remarkable Comeback Amid IRS Troubles
Leave a Reply