As the new year approaches, Americans are gearing up to file their taxes amid ongoing inflation concerns. To aid this process, the Internal Revenue Service (IRS) has announced several adjustments for the upcoming tax year 2024, impacting over 60 tax provisions.
One of the most significant changes is an increase in the standard deduction. For singles and married individuals filing separately, the standard deduction will now be $14,600, reflecting a $750 rise from the previous year. For married couples filing jointly, the deduction increases to $29,200, a jump of $1,500. Meanwhile, heads of households will see their standard deduction reach $21,900, with an increase of $1,100.
Taxpayers should also pay attention to the new tax rates for 2024, which span seven brackets. The top rate of 37% applies to singles earning over $609,350 and married couples earning over $731,200. Lower brackets start at 10% for singles earning $11,600 or less, or married couples earning less than $23,200.
Additionally, the IRS highlighted changes regarding the alternative minimum tax (AMT). The AMT exemption amounts have increased significantly, now at $85,700 for individuals and $133,300 for married couples filing jointly—these amounts phase out at higher income levels.
There are also improvements to the Earned Income Tax Credit (EITC) for 2024, with eligible taxpayers having three or more qualifying children potentially receiving up to $7,830—up by $400 from the previous tax year.
For health savings account contributions, the limit for employees will rise to $3,200, with out-of-pocket expense limits for individual and family coverage also increasing.
Looking ahead, the IRS shared insights on tax year 2025. The standard deduction is set to rise further, reaching $15,000 for singles and $30,000 for married couples filing jointly. The EITC for the following year will also see an increase to $8,046 for qualifying taxpayers.
Navigating these changes may help alleviate some financial strain for taxpayers as they prepare to file their taxes. The adjustments in standard deductions, tax brackets, and credits reflect an effort by the IRS to support taxpayers in dealing with inflation.
In summary, these tax changes for 2024 and 2025 are positioned to offer some financial relief for American taxpayers, potentially making it easier to manage their obligations in a challenging economic environment. This proactive approach by the IRS serves to underscore a commitment to easing the tax burden during times of rising costs.