As January approaches, American taxpayers are gearing up to file their returns, facing continuing inflation pressures on their finances. To assist in this process, the Internal Revenue Service (IRS) has announced significant inflation adjustments, affecting over 60 tax provisions for tax year 2024.
The IRS previously released adjusted figures for the upcoming tax year. Notably, the standard deduction has raised expectations for many filers. For single taxpayers and individuals filing separately, the deduction has increased to $14,600, a $750 increase from 2023. For married couples filing jointly, the standard deduction rises to $29,200, an $1,500 bump from last year. If married and filing as head of household, taxpayers will enjoy a $1,100 increase, bringing the total to $21,900.
Additional key changes for tax season include new tax rates across the seven brackets for tax year 2024:
– 37% for single incomes over $609,350 and married couples over $731,200
– 35% for single incomes over $243,725 and married couples over $487,450
– 32% for single incomes over $191,950 and married couples over $383,900
– 24% for single incomes over $100,525 and married couples over $201,050
– 22% for single incomes over $47,150 and married couples over $94,300
– 12% for single incomes over $11,600 and married couples over $23,200
– 10% for income below these thresholds
Moreover, the alternative minimum tax exemption (AMT) has seen increases as well. For 2024, the AMT exemption will be $85,700 for singles and $133,300 for couples, with phase-out thresholds also rising significantly.
For those claiming the Earned Income Tax Credit (EITC), the maximum benefit for taxpayers with three or more qualifying children increases by $400 to $7,830 for the year ahead.
Changes will also extend to health savings accounts, with the contribution limit set to rise to $3,200. Additionally, out-of-pocket expense limits for medical accounts will see increases for both individual and family plans.
Looking forward, the IRS has also outlined anticipated changes for tax year 2025, which taxpayers will navigate in early 2026. The standard deduction is expected to climb further, easing some financial burdens.
In summary, while inflation continues to challenge Americans financially, these upcoming changes could provide relief in the form of higher deductions and credits that allow taxpayers to retain more of their earnings. As the economy adjusts and inflation impacts persist, these adjustments signify a hopeful step towards aiding families as they prepare for the upcoming tax season.