IRS Increases Standard Deduction and Adjusts Tax Rates for 2024
In a move that brings some relief to taxpayers, the Internal Revenue Service (IRS) has announced an increase in the standard deduction and adjustments to tax rates for the year 2024. This adjustment is expected to result in lower income taxes for most individuals and possibly a lower tax rate. While high inflation has posed challenges, this development offers a positive outcome for taxpayers. Let’s delve into the details of these changes.
Married couples filing jointly for tax year 2024 will see their standard deduction rise by $1,500 to $29,000. Similarly, single filers will benefit from an increase of $750, raising the standard deduction to $14,600. Heads of household will also experience an uptick, with their standard deduction rising by $1,100 to $21,900.
Despite these adjustments, the top tax rate will remain unchanged at 37%. However, the income threshold for this rate will increase to $609,350, up from the previous year’s threshold of $578,125. On the other end of the spectrum, the lowest tax rate of 10% will apply to single filers with incomes of $11,600 or less, and $23,200 for married couples.
For a clearer understanding, here are the other marginal tax rates:
– 2% for incomes over $11,600 for single filers and $23,200 for married couples filing jointly
– 22% for incomes over $47,150 and $94,300 for married couples
– 24% for incomes over $100,525 and $201,050 for married couples
– 32% for incomes over $191,950 and $383,900 for married couples
– 35% for incomes over $243,725 and $487,450 for married couples
It’s important to note that these changes will apply to the 2024 taxes, which individuals will file in 2025. Therefore, taxpayers filing their 2023 taxes by April 15 of next year will not be affected.
The adjustments to taxable income offer some respite for Americans grappling with the impact of high inflation. However, there is a possibility of higher borrowing costs in the future if the Federal Reserve decides to raise interest rates further. Federal Reserve Chair Jerome Powell explained that striking a balance is crucial to prevent inflation from spiraling out of control.
While these changes provide relief for taxpayers, it’s essential to understand the broader implications they may have on the economy. As always, it is advisable to consult with tax professionals or financial advisors to fully comprehend the impact of these adjustments on individual financial situations.
Overall, the IRS’s decision to increase the standard deduction and adjust tax rates for the tax year 2024 aims to ease the tax burden for most individuals. By putting more money back in the pockets of taxpayers, these changes can offer some much-needed financial relief.
