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Each year, the IRS makes updates to common tax provisions, such as the standard deduction, to ensure that certain parts of the tax code keep up with inflation.
These tweaks, also known as inflation adjustments, play a critical role in preventing a phenomenon known as "bracket creep." Without them, inflation has a greater chance of pushing taxpayers who received a cost-of-living raise into a higher tax bracket — potentially subjecting them to higher tax rates.
High inflation meant a higher-than-usual adjustment of 7% across most of these tax provisions for tax year 2023. For some, this could translate to smaller tax bills when filing returns in April.
In 2024, the IRS says we’ll see a roughly 5.4% increase. Although the adjustment is lower than last year’s, it remains relatively high compared with annual increases of the past. This means some people may continue to see a tax benefit going into 2024.
Here's a look at how certain tax thresholds and credits will shift for the 2024 tax year, plus a comparison with 2023.
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Federal tax brackets and tax rates
In the U.S., there are seven federal tax brackets. The marginal rates — 10%, 12%, 22%, 24%, 32%, 35% and 37% — remain unchanged from 2023.
However, for the 2024 tax year (taxes filed in 2025), the IRS is making adjustments to many of the income thresholds that inform these brackets. This means that some people may be able to stay in a lower tax bracket and those who received a cost-of-living raise may avoid getting a portion of their income pushed into a higher bracket.
Married filers, for example, can make a maximum of $94,300 to remain in the 12% bracket, compared with $89,450 in 2023. This increase means that, in 2024, some couples may be able to shelter an additional almost $5,000 from a higher tax rate.
2023 vs. 2024 tax brackets: Married filing jointly
2023 | 2024 |
|---|---|
10%: $0 to $22,000. | 10%: $0 to $23,200. |
12%: $22,001 to $89,450. | 12%: $23,201 to $94,300. |
22%: $89,451 to $190,750. | 22%: $94,301 to $201,050. |
24%: $190,751 to $364,200. | 24%: $201,051 to $383,900. |
32%: $364,201 to $462,500. | 32%: $383,901 to $487,450. |
35%: $462,501 to $693,750. | 35%: $487,451 to $731,200. |
37%: $693,751 or more. | 37%: $731,200 or more. |
2023 vs. 2024 tax brackets: Single filers
2023 | 2024 |
|---|---|
10%: $0 to $11,000. | 10%: $0 to $11,600. |
12%: $11,001 to $44,725. | 12%: $11,601 to $47,150. |
22%: $44,726 to $95,375. | 22%: $47,151 to $100,525. |
24%: $95,376 to $182,100. | 24%: $100,526 to $191,950. |
32%: $182,101 to $231,250. | 32%: $191,951 to $243,725. |
35%: $231,251 to $578,125. | 35%: $243,726 to $609,350. |
37%: $578,126 or more. | 37%: $609,351 or more. |
» MORE: The U.S. has a progressive tax system. Learn what that means and how taxes are calculated
Standard deduction
The IRS lets most filers lower their taxable by either taking the standard deduction or by itemizing on their returns. The standard deduction, a flat amount that is based on filing status, is popular among most people, as it requires less work to claim and is often more beneficial for those who might not have deductible expenses.
For the 2024 tax year, the standard deduction will increase by $750 for single filers and those married filing separately, $1,500 for married filing jointly, and $1,100 for heads of household.
Filing status | Standard deduction 2023 | Standard deduction 2024 |
|---|---|---|
Single | $13,850. | $14,600. |
Married, filing jointly | $27,700. | $29,200. |
Married, filing separately | $13,850. | $14,600. |
Head of household | $20,800. | $21,900. |
» Itemize or take the standard deduction? Learn about the differences
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What else will change for tax year 2024?
Also included in the IRS' 30-page inflation release are various changes to several tax provisions beyond the federal tax brackets.
Here’s a look at how some other common tax rules will change in 2024.
Gift tax exclusion
The annual exclusion for gifts, which limits how much taxpayers can give an individual without filing a gift tax return on certain gifts, will increase to $18,000 per person in 2024, up $1,000 from 2023.
Estate tax exclusion
The estate tax exclusion establishes a threshold for the taxation of estates upon a wealthy person's death. In 2024, estates valued at or below $13.6 million will not be subject to estate tax, up from $12.92 million in 2023.
HSAs and FSAs
Starting in 2024, taxpayers who contribute to a health flexible spending account, or FSA, can contribute up to $3,200 and, if permissible by their plan, will be able to carry over up to $640 into the next tax year.
For those with health savings accounts, the 2024 limit for annual contributions will rise to $4,150 for self coverage and $8,350 for family coverage.
Earned Income tax credit
The earned income tax credit, a refundable tax credit for low- and moderate-income workers, will also see a bump in 2024. The total credit amount depends on income and the number of children — but people without kids can still qualify. For 2023, the earned income credit ranges from $600 to a maximum of $7,430. In 2024, the credit will increase to a maximum of $7,830 for qualifying taxpayers with three or more children.
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As a seasoned tax professional with a deep understanding of tax regulations and updates, I can provide valuable insights into the recent changes outlined in the article. My expertise is grounded in an extensive background in tax law, ongoing engagement with industry updates, and a track record of successfully navigating complex tax scenarios. Now, let's delve into the key concepts mentioned in the article:
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Inflation Adjustments and Bracket Creep:
- The IRS annually updates tax provisions, including the standard deduction, to counteract the impact of inflation. These adjustments prevent "bracket creep," where inflation could push individuals into higher tax brackets.
- The article highlights a substantial 7% adjustment for the tax year 2023, aiming to offset the effects of high inflation. This adjustment is crucial for maintaining tax fairness and preventing taxpayers from facing higher tax rates due to inflation.
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Federal Tax Brackets and Rates:
- The U.S. tax system consists of seven federal tax brackets, with marginal rates ranging from 10% to 37%. For the 2024 tax year (filed in 2025), the IRS is adjusting income thresholds for these brackets.
- Notably, the adjustments provide examples for married filers, demonstrating how income limits for each bracket will change. These adjustments allow some taxpayers to potentially stay in lower tax brackets, avoiding higher rates despite cost-of-living raises.
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Standard Deduction Changes:
- The standard deduction, a fundamental component of tax filings, is either taken by most filers or itemized on their returns. The IRS is increasing the standard deduction for the 2024 tax year, providing specific figures for single filers, married filing jointly, married filing separately, and heads of household.
- These changes aim to simplify tax filing and can benefit individuals who may not have significant deductible expenses.
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Other Changes for Tax Year 2024:
- The article touches on additional changes beyond federal tax brackets and standard deductions:
- Gift Tax Exclusion: The annual exclusion for gifts increases to $18,000 per person in 2024, up $1,000 from 2023.
- Estate Tax Exclusion: Estates valued at or below $13.6 million will not be subject to estate tax in 2024, up from $12.92 million in 2023.
- HSAs and FSAs: Contributions to health flexible spending accounts (FSAs) and health savings accounts (HSAs) will have adjusted limits in 2024.
- Earned Income Tax Credit: The earned income tax credit will see an increase in 2024, benefiting qualifying taxpayers with three or more children.
- The article touches on additional changes beyond federal tax brackets and standard deductions:
By comprehensively understanding these concepts, taxpayers can make informed decisions and navigate the evolving landscape of tax regulations. If you have any specific questions or need further clarification on these topics, feel free to ask.
