IRS Adjusts Tax Brackets Upwards for 2024, Offering Potential Tax Breaks for Some
In an effort to keep up with the impact of inflation, the Internal Revenue Service (IRS) has announced that tax brackets for the year 2024 will be adjusted upwards by 5.4%. This adjustment is aimed at providing a potential tax break for certain taxpayers and preventing the phenomenon known as “bracket creep.”
Tax brackets, which determine the percentage of income that individuals and families owe in taxes, are adjusted annually based on the Consumer Price Index (CPI). The purpose of this adjustment is to account for the rising cost of living and ensure that workers are not unintentionally pushed into higher tax brackets as a result.
By increasing the tax brackets, more of a taxpayer’s income will fall into lower tax brackets. This means that individuals and families may potentially pay a lower percentage of their income in taxes, leading to a tax break for some taxpayers.
The standard deduction, a fixed amount that reduces the amount of income subject to taxes, will also see a 5.4% increase in 2024. For married couples filing jointly, the new standard deduction will be $29,200. This adjustment aims to offer further relief to taxpayers by reducing their overall taxable income.
In addition to the adjustment in tax brackets and standard deduction, tax-advantaged accounts for health care expenses will also see higher contribution limits in 2024. Flexible spending accounts (FSAs) will have a contribution limit of $3,200, while health savings accounts (HSAs) will have a contribution limit of $4,150 for single taxpayers and $8,300 for families. Individuals older than 55 will still be able to contribute an extra $1,000 to their HSAs.
Taxpayers can expect to file their 2024 taxes in early 2025, taking into account these adjustments in tax brackets and deductions. As always, it is advisable for individuals and families to consult with tax professionals or utilize online tax software to ensure they are taking advantage of applicable deductions and tax breaks.
The adjustments made by the IRS for the year 2024 aim to provide relief for taxpayers, prevent bracket creep, and account for the impact of inflation. These changes have the potential to reduce the tax burden for certain individuals and families, allowing them to keep more of their hard-earned income.
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