The United States has just launched a new adjustment for one of its most common subsidies, designed to adapt to inflation and new tax rules. In this sense, the federal government has announced the new Income Tax Brackets for 2024, which come to change everything and whose deductions we tell you about so that you can take advantage of them.
New Income Tax Brackets for 2024: the changes, unveiled by Social Security
The US federal income tax system uses a progressive tax bracket structure to determine how much tax individuals and married couples owe based on their taxable income. Tax brackets are income ranges that correspond to different tax rates. As your taxable income increases, you move into higher tax brackets that are taxed at higher rates.
For example, for tax year 2023, the tax brackets are:
- 10% for taxable income from $0 to $11,000.
- 12% for taxable income from $11,001 to $44,725.
- 22% for taxable income from $44,726 to $95,375.
- 24% for taxable income from $95,376 to $182,100.
- 32% for taxable income from $182,101 to $578,125.
- 35% for taxable income over $578,125.
This means that if your taxable income is $60,000, your first $11,000 would be taxed at 10%, the amount from $11,001 to $44,725 would be taxed at 12%, and the amount from $44,726 to $60,000 would be taxed at 22%.
The progressive bracket structure means that higher incomes are taxed at higher rates. But it’s important to note that the higher tax rate only applies to the amount that falls within that bracket – not your entire income. This helps prevent lower-income taxpayers from being taxed at rates meant for wealthier taxpayers.
These are Income Tax Brackets for 2024: Government has been clear with modifications
The IRS recently announced inflation adjustments for 2024, which include changes to the federal income tax brackets. For 2024, the bracket thresholds will be increased to account for inflation. This means that incomes will rise into higher brackets in 2024 compared to 2023, resulting in higher taxes for some taxpayers.
The IRS adjusts tax brackets annually to prevent “bracket creep” – where inflation pushes taxpayers into higher brackets and higher tax rates, even though their real purchasing power has not increased. The inflation adjustments are based on the Consumer Price Index (CPI).
For 2024, the bracket thresholds will rise by about 7% across the board. This increase is substantially higher than recent years due to high inflation. For example, from 2022 to 2023, tax bracket thresholds only rose by about 3%.
There are also changes to standard deductions: that´s all you have to know
The standard deduction is increasing in 2024 to account for inflation. The standard deduction is a fixed dollar amount that reduces your taxable income if you do not itemize your deductions.
The main drawback of the Income Tax Brackets for this year will be those applied to energy efficiency deductions. Regardless of the tax credits that we show you frequently, the other programs will be affected.
- For single taxpayers, the standard deduction will rise from $12,950 in 2023 to $13,850 in 2024. That’s an increase of $900.
- For married couples filing jointly, the standard deduction will increase from $25,900 to $27,700 in 2024. That’s a bump up of $1,800.
- For heads of households, the standard deduction will go up from $19,400 to $20,800 – an increase of $1,400.
The larger standard deduction means that fewer taxpayers will choose to itemize deductions going forward. Itemizing only makes sense if your total itemized deductions exceed the standard deduction amount. With the standard deduction being adjusted upward, less taxpayers will hit that threshold.
Once again, the Income Tax Brackets for 2024 are controversial, especially because of the effect that inflation is having on the whole country. In the midst of a context in which we are beginning to overcome it, there are many families who claim to have been left behind, something to which the Federal Government itself has referred these days.