(PartiallyPolitics.com) – As we look ahead to tax year 2024, American taxpayers can anticipate a mixed bag of outcomes due to the Internal Revenue Service’s (IRS) adjustments in response to inflation. These changes, set to affect the tax returns filed in 2025, will see some enjoying a higher take-home pay, while others may feel a pinch as a larger slice of their earnings goes to taxes.
The standard deduction, which determines the portion of income not subject to federal tax, is on the rise. Married couples filing jointly will see this figure jump to $29,200, and for single filers, it will increase to $14,600, marking upswings of $1,500 and $750 respectively. Heads of households are not left out, with their deduction climbing by $1,100 to $21,900.
These increases, as explained by Jim Seida, a business professor at the University of Notre Dame, suggest that more taxpayers will opt for the standard deduction over itemizing deductions, as the latter may not keep pace with inflation in areas such as state and local taxes, mortgage interest, and charitable donations.
Tax brackets are also experiencing a shift. At the upper end, incomes over $609,350—or $731,200 for married couples filing jointly—will be taxed at 37%. The bracket for those earning more than $243,725 (or $487,450 for joint filers) will see a 32% rate. Further down, incomes exceeding $191,950 (or $383,900 for joint filers) will also fall into the 32% bracket, while those making over $100,525 (or $201,050 for joint filers) will face a 24% tax rate.
For individuals earning above $47,150 (or $94,300 for joint filers), the tax rate is 22%, and those earning above $11,600 (or $23,200 for joint filers) will continue to owe 10%. Those with earnings below these thresholds will also pay taxes at the 10% rate.
The alternative minimum tax exemption amount is set to increase, and the Earned Income Tax Credit will offer a maximum of $7,830, providing slight relief based on inflation adjustments.
Despite these updates, some aspects remain constant. The personal exemption for the 2024 tax year will still be zero, and there will be no cap on itemized deductions, preserving a semblance of familiarity amidst these financial recalibrations.
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