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The IRS just announced a host of key changes for 2024. Read on to learn more.
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A lot of us don’t really think about taxes until the time comes to file a return. But it’s important to have a pulse on your tax situation at all times. And part of that means knowing what tax bracket you fall into. The IRS just announced a new set of tax brackets for 2024, along with some other key changes you’ll want to know about.
Introducing the 2024 tax brackets
If you’re not sure what a tax bracket is exactly, fear not. The U.S. tax system is a marginal one that has you paying more tax on your highest dollars of income.
If you earn $100,000, you’re not going to pay the same tax rate on that entire sum. Rather, your lowest dollars of earnings will be taxed at one rate, and your highest dollars of earnings will be taxed at another.
With that in mind, here are the tax brackets for 2024:
You’ll notice that the tax brackets are different for married couples filing jointly than for singles, which makes sense. It would be unfair to impose the same set of income requirements for what could potentially be a dual-income household as a single-income household.
Going back to our example, though, let’s say you’re single and earning $100,000. That puts you in the 22% tax bracket for 2024. But you’re only going to pay a 22% tax rate on about half of your income, since only $47,151 to $100,525 falls into that bracket.
You should also know that your tax bracket is not the same thing as your effective tax rate. Your effective tax rate is the percentage you owe on all your taxable income. That includes not just your earnings from a job, but also, income from interest in a savings account and/or capital gains in a brokerage account. An accountant will usually tell you what your effective tax rate is when they complete your tax return.
Other tax changes are in store for 2024
In addition to announcing a new set of tax brackets, the IRS has also made a number of key updates for 2024. Some highlights include:
A standard deduction of $14,600 for single tax-filers, an increase of $750 from 2023A standard deduction of $29,200 for married couples filing jointly, an increase of $1,500 from 2023A maximum $7,830 Earned Income Tax CreditA flexible spending account limit of $3,200, up from $3,050 in 2023An adoption credit of $16,810, up from $15,950 for 2023
If you’re curious as to how next year’s tax changes will impact your finances, it’s a good idea to sit down with your accountant and discuss them. Many people only reach out to their accountants as the tax-filing deadline gets closer. But having a conversation at some point in November could benefit you. This way, your accountant can tell you what to expect in 2024 and offer tips on last-minute steps you can take in December to reduce your tax burden for 2023.
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