As we approach January 2024, many Americans are bracing for tax season as inflation continues to affect their finances. To help alleviate some of this burden, the Internal Revenue Service (IRS) has announced inflation adjustments for over 60 tax provisions, including some key changes that could benefit taxpayers.
For the upcoming tax year 2024, the standard deduction has increased significantly: single filers and married individuals filing separately can claim a deduction of $14,600, which is a $750 increase from the previous year. For married couples filing jointly, the standard deduction has risen to $29,200, an increase of $1,500. Heads of households will also see an increase, with their deduction rising by $1,100 to $21,900.
The IRS has outlined the tax rates for its seven tax brackets for 2024, with rates ranging from 10% for individuals earning up to $11,600 to 37% for single filers with incomes exceeding $609,350 and married couples filing jointly over $731,200.
Additionally, significant changes have been made concerning tax exemptions and credits. The exemption amount for the Alternative Minimum Tax (AMT) has risen to $85,700, and for married couples filing jointly, it stands at $133,300. The maximum Earned Income Tax Credit for taxpayers with three or more qualifying children has also increased to $7,830, providing more support for working families.
For health savings accounts, the contribution limit has been raised to $3,200, with new out-of-pocket expense limits set at $5,550 for individual coverage and $10,200 for family coverage.
Looking ahead, the IRS has already provided insights into changes for tax year 2025, where the standard deduction is expected to increase further to $15,000 for single filers, $30,000 for married couples filing jointly, and $22,500 for heads of households. Tax rates will also see adjustments, reflecting rising incomes.
In summary, while inflation has posed challenges for many taxpayers, these IRS adjustments offer some relief that could enhance financial stability in the coming year. Taxpayers are encouraged to remain informed and take advantage of these changes to maximize their deductions and credits.
Overall, these adjustments signal a responsive approach to the economic environment, and as taxpayers prepare for 2024, there is a sense of optimism that these measures can help ease the financial strain caused by ongoing inflation.