The IRS just announced the new brackets for 2024—boosting paychecks and lowering income taxes for many Americans. (1)
For those who don’t know, the IRS adjusts the tax brackets annually to avoid so-called “bracket creep”—or when inflation forces taxpayers into a higher tax bracket without the additional income.
This is a crucial factor in managing financial matters for many Americans—especially piggybacking off the super-high inflation rates of 2022, which lead to the historic 7% tax bracket boost of 2023. And although inflation has eased ever-so-slightly this year, the IRS increased its brackets by about 5.4% for each type of tax filer in 2024. (2)
So, what’s changed?
Tax brackets are moving higher in 2024—here are the new rates:
And here are the rates for single filers compared to 2023:
For married filers:
- The 2024 maximum earned income tax credit will be $7,830 for those with three or more qualifying children, compared to $7,430 in 2023.
- The contribution limit for flexible spending accounts—used to save pre-tax dollars for medical costs—will increase from $3,050 to $3,200 next year.
- Estates of decedents who die in 2024 will have a basic exclusion amount of $13,610,000, compared to 2023’s $12,920,000.
- The foreign income exclusion will increase to $126,500 in 2024 from $120,000.
- The gift exclusion will increase to $28,000 from $17,000.
- The maximum credit allowed for adoptions will increase to $16,810 from $15,950. (3)
What hasn’t changed?
- Personal exemption for tax year 2024 is staying at 0.
- There is still no limitation on itemized deductions, effective since 2018.
- No changes were made to the modified adjusted gross income amount used to determine reductions to the lifetime learning credit. And, the credit will still be phased out with modified adjusted gross incomes over $80,000 ($160,000 for joint returns). (4)
Curious about how this affects your current financial strategy? Contact our team of CPAs for a consultation today.
(1) Tyko, K. (2023, November 9). IRS releases tax brackets, inflation adjustments for 2024. Axios. https://www.axios.com/2023/11/09/irs-tax-brackets-2024-federal-income-taxes
(2) Picchi, A. (2023, October 24). The IRS will soon set new tax brackets for 2024. Here’s what that means for your money. CBS News. https://www.cbsnews.com/news/taxes-2024-tax-brackets-irs-inflation-adjustments/
(3) Waggoner, M. (2023, November 9). IRS announces annual inflation adjustments for tax year 2024. Journal of Accountancy. https://www.journalofaccountancy.com/news/2023/nov/irs-announces-annual-inflation-adjustments-for-tax-year-2024.html
(4) Tanner, J. (2023, November 9). IRS announces 2024 income tax brackets – see where you fall. The Hill. https://thehill.com/homenews/nexstar_media_wire/4302512-irs-announces-2024-tax-brackets-see-where-you-fall/