Every year, the IRS makes inflation adjustments to the U.S. tax brackets to make sure the rates are applying to the same amount of spending power. The 2024 figures were just announced, and because inflation remained at a historically high level throughout 2023, the income ranges that correspond to each marginal tax rate are increasing substantially for the 2024 tax year.
Here’s an overview of the 2024 U.S. tax brackets for different filing statuses, how the tax brackets really work, and most importantly, why your taxes could actually go down in 2024.
First, the numbers in the tables above refer to taxable income, which is different from your gross, or total income. Your taxable income is the amount of money that is left after applying any adjustments and deductions to which you are entitled. For example, if you are single and earn $100,000 in 2024, have a $7,000 deduction for retirement contributions, and use the $14,600 standard deduction, your taxable income would be $78,400.
Second, these are marginal tax brackets. Consider the above example of a single individual with $78,400 of taxable income. Based on the tax brackets for single filers in the chart, their tax would be calculated as follows:
10% of the first $11,60012% of the amount between $11,600 and $47,15022% on the portion of taxable income that exceeds $47,150
In addition to the changes to the tax brackets, the standard deduction is increasing as well. For married couples, the 2024 standard deduction is rising to $29,200, a $1,500 increase compared with 2023. For singles and heads of household, the 2024 standard deduction will be $14,600 and $21,900, respectively.
Many other significant tax items are also adjusted annually for inflation, such as the maximum earned income tax credit (EITC) and the Alternative Minimum Tax exemption, both of which are rising significantly as well.
As the IRS does every year, it adjusted the 2024 tax brackets upward to compensate for inflation, which remained high for yet another year. And for many people, this could mean a lower tax bill.
If your income has roughly kept pace with inflation, the idea is that there should be a minimal (if any) change to your effective tax rate. But the reality is that many incomes didn’t. If your income has not, you could see your federal income taxes go down in 2024 because of the higher income ranges that correspond to each marginal tax rate.
Consider this example. Let’s say that you are married and earn $100,000 in 2023. You claim the 2023 standard deduction for married couples filing jointly ($27,700), which brings your taxable income down to $72,300. I’ll spare you the math, but based on the 2023 tax brackets, you would owe $8,236 in federal tax for 2023.
Now, let’s say that you earn $100,000 again in 2024. For one thing, the higher 2024 standard deduction would reduce your taxable income to $70,800. And the generally more favorable tax brackets would mean that you owe $8,032, or over $200 less than in 2023.
To be perfectly clear, I hope that your income increases along with inflation and then some in 2024. But if that’s not the case, the point is that you could see some tax relief. And finally, it’s important to note that these changes are all for the 2024 tax year — that is, the tax return you’ll file in 2025.
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