As the year comes to a close, tax season is just around the corner, making it essential to understand what to expect regarding potential tax liabilities or refunds.
The upcoming tax filing season is set to begin in January, with specific dates to be announced by the Internal Revenue Service (IRS). Traditionally, this announcement occurs in early to mid-January, providing taxpayers with a timeline to prepare their returns. In 2024, tax season is anticipated to open on January 29, following the pattern of previous years.
The IRS has made adjustments to the tax brackets and standard deductions for the 2024 tax year, which are designed to reflect inflation. The standard deduction for married couples filing jointly will increase to $29,200, a rise of $1,500 from the previous year, while single filers will have a standard deduction of $14,600, up $750. Heads of households will enjoy a standard deduction of $21,900, marking an increase of $1,100.
Here are the applicable tax brackets for the 2024 tax year:
– 37% for incomes exceeding $609,350 (or $731,200 for married couples filing jointly)
– 35% for incomes over $243,725 (or $487,450 for married couples filing jointly)
– 32% for incomes over $191,950 (or $383,900 for married couples filing jointly)
– 24% for incomes over $100,525 (or $201,050 for married couples filing jointly)
– 22% for incomes over $47,150 (or $94,300 for married couples filing jointly)
– 12% for incomes exceeding $11,600 (or $23,200 for married couples filing jointly)
– 10% for incomes of $11,600 or less (or $23,200 for married couples filing jointly)
Looking ahead to the 2025 tax year, the IRS has announced further increases in the standard deductions, providing married couples filing jointly with a deduction of $30,000, an increase of $800. For heads of households, the deduction will rise to $22,500, and for single taxpayers, it will increase to $15,000.
This consistent adjustment in standard deductions and tax brackets aims to promote equity in the tax system and alleviate some of the financial pressures that may arise due to inflation.
With these modifications, taxpayers have the opportunity to reassess their financial situations and plan accordingly. Being informed and preparing early can lead to a smoother tax filing experience.
In summary, while tax season can be daunting, understanding the changes to tax codes and planning ahead can reduce stress and even enhance financial well-being. As we look forward, these adjustments serve as a reminder of the importance of proactive financial planning.