The IRS has introduced inflation-adjusted tax brackets for the 2024 tax year, which will generally apply to income tax returns filed in 2025. These adjustments reflect the U.S. system of progressive taxation, where lower incomes are taxed at lower rates and higher incomes at higher rates. The changes aim to account for inflation and reduce the tax burden on many Americans.
Under the new rates, individuals earning up to $11,600 and couples earning up to $23,200 will pay 10% in taxes. These thresholds have increased from 2023, when the limits were $11,000 for single filers and $22,000 for joint filers. For those earning between $11,601 and $47,150, the tax rate will be 12%, while couples earning between $23,201 and $94,300 will also fall into this bracket. This is an increase from last year’s limits of $11,001–$44,725 for singles and $22,001–$89,450 for joint filers.
For the 22% tax bracket, single filers earning between $47,151 and $105,525 will fall within this range, as will couples earning between $94,301 and $201,149. Previously, this bracket covered incomes between $44,726–$95,375 for singles and $89,451–$190,750 for couples. Similarly, individuals earning between $105,526 and $191,950 will pay 24% in taxes, while couples with incomes between $201,150 and $383,899 will also be taxed at this rate.
Higher income brackets will see proportional adjustments as well. The 32% bracket will apply to single filers earning $191,951 to $243,725 and couples earning $383,900 to $487,449. Those earning above these amounts but below $609,349 (for singles) or $731,199 (for couples) will pay 35%. Incomes exceeding these thresholds will fall into the highest tax bracket of 37%.
What’s New?
The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200, an increase of $1,500 from 2023. For single taxpayers and married individuals filing separately, the standard deduction increases to $14,600, up $750, and for heads of households, the deduction rises to $21,900, up $1,100.
The Alternative Minimum Tax (AMT) exemption amount for 2024 is $85,700, phasing out at $609,350 for individuals, and $133,300 for married couples filing jointly, phasing out at $1,218,700. Comparatively, in 2023, the exemption amount was $81,300, phasing out at $578,150 for individuals and $126,500 for couples, phasing out at $1,156,300.
The Earned Income Tax Credit (EITC) for 2024 has a maximum value of $7,830 for taxpayers with three or more children, up from $7,430 in 2023. Updated tables detail the EITC amounts for other categories and phase-out thresholds.
For 2024, the monthly limitation for qualified transportation fringe benefits and parking rises to $315, an increase of $15 from 2023. Similarly, employee salary reductions for contributions to health flexible spending arrangements increase to $3,200, while the carryover limit for unused amounts rises to $640, up $30.
For participants in Medical Savings Accounts (MSAs), the 2024 annual deductible for self-only coverage must be between $2,800 and $4,150, with a maximum out-of-pocket limit of $5,550. For family coverage, the deductible ranges from $5,550 to $8,350, with an out-of-pocket cap of $10,200.
The foreign earned income exclusion increases to $126,500 for 2024, up from $120,000 in 2023. Estates of decedents who pass away in 2024 have a basic exclusion amount of $13,610,000, up from $12,920,000 in 2023.
The annual gift exclusion rises to $18,000 for 2024, compared to $17,000 in 2023. For adoptions, the maximum credit for tax year 2024 increases to $16,810, up from $15,950 in 2023.
Understanding Marginal Tax Rates
Taxpayers often misunderstand their tax bracket. For example, if someone earns $47,151, they are not taxed 22% on the entire income. Instead, the first $11,600 is taxed at 10%, the portion from $11,601 to $47,150 is taxed at 12%, and only the amount above $47,151 is taxed at 22%. This system ensures incremental taxation and prevents undue burden on taxpayers.
The new tax changes for 2024 are expected to save taxpayers thousands of dollars through various adjustments and increased limits. However, the exact savings will vary based on individual circumstances and income levels.
Kishor Panthi
View More PostsKishor Panthi is the founder and editor-in-chief of Khasokhas and NepYork. He is the author of three books, “Kampan,” "UNTRANSLATABLE" and “Zero Mile.” He writes about social issues, immigration, and politics.
