As the new year approaches, Americans are gearing up for tax season, with the Internal Revenue Service (IRS) implementing various adjustments to account for inflation in 2025. This year’s adjustments will affect over 60 tax provisions, aiming to provide some relief to taxpayers amid ongoing inflationary pressures.
For the upcoming tax year 2024, the IRS has increased the standard deduction significantly, bringing it to $14,600 for single filers and married individuals filing separately—up $750 from 2023. For married couples filing jointly, the deduction will be $29,200, an increase of $1,500. Additionally, heads of households will benefit from a deduction of $21,900, which reflects a rise of $1,100.
Taxpayers should also take note of the updated tax rates for 2024, which span seven brackets, ranging from 10% for those earning $11,600 or less to 37% for single filers with incomes over $609,350 and couples filing jointly exceeding $731,200.
The IRS has also raised the alternative minimum tax (AMT) exemption amount. For individuals, the exemption is now $85,700, while married couples filing jointly will see an exemption of $133,300. This adjustment aims to ensure that high-income taxpayers contribute a minimum amount of tax despite various deductions.
Furthermore, the Earned Income Tax Credit (EITC) for taxpayers with three or more qualifying children has increased to a maximum of $7,830—an additional $400 from the previous year, supporting low- to middle-income families during these challenging financial times.
Health savings account contributions will also see an increase, with limits rising to $3,200 for employees and out-of-pocket expenses adjusting accordingly.
Looking ahead, the IRS has outlined forthcoming changes for tax year 2025, which are equally significant. The standard deduction will further increase to $15,000 for single filers, and $30,000 for couples filing jointly, providing additional tax relief.
These adjustments are positive news for taxpayers as they navigate the complexities of tax filing in a fluctuating economy. With these new changes, individuals and families have the opportunity to keep more of their hard-earned money, potentially easing some of the financial burdens caused by inflation.
In summary, the IRS’s adjustments not only reflect an understanding of the current economic landscape but also aim to support taxpayers in optimizing their finances for the coming year. As we step into 2024, taxpayers have reason to feel optimistic about the potential savings on their tax bills.