Taxpayers will have higher standard deductions and there will be other changes for tax year 2024, due to adjustments made by the IRS because of inflation.
The standard deduction for married couples filing jointly will increase by $1,500 to $29,200, and it will go up by $750 to $14,600 for single taxpayers and married individuals filing separately. This means more taxpayers will be able to retain more of their yearly income.
“Every year in September, the Bureau of Labor Statistics produces the August consumer price index,” IRS spokesman Anthony Burke said. “The IRS takes those figures and applies them to about 60 tax items that have to be, by law, adjusted for inflation. And so, it moves up various rates, various things change and most of these are beneficial for taxpayers because it has to keep track with inflation to keep things fair.”
While some taxpayers itemize their deductions, most rely on the standard deduction.
“It’s a more important figure for more people today than it used to be. Almost 90% of all individual income tax filers use the standard deduction,” Burke said.
Income levels will also be raised for the various income tax brackets:
- 37% for incomes over $609,350 ($731,200 for married couples filing jointly)
- 35% for incomes over $243,726 ($487,451 for married couples filing jointly)
- 32% for incomes over $191,951 ($383,901 for married couples filing jointly)
- 24% for incomes over $100,526 ($201,051 for married couples filing jointly)
- 22% for incomes over $47,151 ($94,301 for married couples filing jointly)
- 12% for incomes over $11,601 ($23,201 for married couples filing jointly)
- 10% for incomes up to $11,600 (up to $23,200 for married couples filing jointly)
Other inflation adjustments include a $400 increase in the earned income tax credit from $7,430 to $7,830. There will also be an increase for the annual exclusion of gifts from $17,000 to $18,000 ($36,000 for married couples filing jointly).
Another change announced this month by the IRS for tax year 2024 is an increase in the limit to contributions for retirement plans including 401Ks and IRAs. That limit is rising from $22,500 to $23,000.
All of these changes will apply to 2024 earnings, which will be registered on tax forms prepared in 2025.
