(NEXSTAR) – Millions of Americans could take home more pay in 2024 thanks to inflation adjustments to the tax code announced by the IRS on Thursday.
The changes to the standard deduction and individual income brackets, among other adjustments, in tax year 2024 will apply to tax returns filed in 2025.
One of the principal reasons behind the annual adjustment is to combat “bracket creep,” when inflation pushes taxpayer incomes into higher tax brackets without actually giving workers additional purchasing power. Annual changes to income tax brackets and other provisions are put in place to offset inflation.
Changes to the standard deduction
The standard deduction – which reduces the amount of income on which you’re taxed – will go up to $29,200 for married couples filing jointly, an increase of $1,500. For single taxpayers and married individuals filing separately, the standard deduction will rise $750 to $14,600. Finally, for heads of households, the standard deduction will jump up $1,100 for tax year 2024 to $21,900.
The IRS also announced changes to the tax brackets that determine what portion of your income is taxable after subtracting either the standard deduction or itemized deductions.
Marginal tax brackets for tax year 2024
|If your taxable income is greater than:||Taxes owed|
|$609,350 ($731,200 for married couples filing jointly)||37%|
|$243,725 ($487,450 for married couples filing jointly)||35%|
|$191,950 ($383,900 for married couples filing jointly)||32%|
|$100,525 ($201,050 for married couples filing jointly)||24%|
|$47,150 ($94,300 for married couples filing jointly)||22%|
|$11,600 ($23,200 for married couples filing jointly)||12%|
Incomes of $11,600 or less for single individuals ($23,200 for married couples filing jointly) will fall into the lowest rate of 10%.
Additional tax provision adjustments
Among the other provisions that will see changes are the alternative minimum tax exemption amount, which will jump up to $85,700 for individuals from $81,300, phasing out at $609,350 instead of $578,150. For married couples filing jointly, the 2024 exemption is $133,300, phasing out at $1,218,700.
Qualifying taxpayers with three or more qualifying children who receive the maximum Earned Income Tax Credit will get $7,830 instead of $7,430.
There are also raises to transportation benefits, limits on employee health flexible spending arrangements, cafeteria plans, medical deductibles, estate exclusion amounts and more.
What isn’t changing
The following items that saw adjustments in the past won’t be changed:
- Personal exemption for tax year 2024 will stay at 0.
- There is no limitation on itemized deductions, which has been in place since tax year 2018
- When it comes to the lifetime learning credit, there is no change in the modified adjusted gross income amount used to determine reductions. The credit will still be phased out with modified adjusted gross incomes over $80,000 ($160,000 for joint returns.)