Starting in January 2024, the Internal Revenue Service (IRS) will update the tax brackets for federal income tax and standard deductions, directly impacting Americans' pockets. For next year, the government agency announced higher limits to avoid a phenomenon known as "level creep," which occurs when taxpayers fall into higher taxes, even though their purchasing power remains in the same place.
The IRS usually updates the tax brackets annually, defined by Economipedia as the "percentage or coefficient that indicates the amount of a tax that a taxpayer must pay to the State." In times of high inflation, the increases are more significant precisely to try to ensure that it has as little impact as possible on individual and family economies. By 2024, these will increase by 5.4%.
In addition to standard deductions and federal income taxes, these thresholds for the amount of the earned income tax credit were increased. Families are now eligible to receive $7,830 if they have three or more qualifying children, up from $7,430 in 2023. In turn, employees will be able to contribute more to their flexible health spending accounts, with the maximum contribution increasing to between $150 and $3,200.
Standard deductions
According to the agency's website, "The standard deduction is a specific dollar amount that reduces the amount of income on which you're taxed. Your standard deduction consists of the sum of the basic standard deduction and any additional standard deduction amounts for age and/or blindness."
For married couples, it will increase to $29,200, up from $27,700, while individual filers will have a new maximum of $14,600 by 2024, up from $13,850.
Tax brackets for individual filers
10%: Taxable income up to $11,600
12%: Taxable income greater than 11,600
22%: Taxable income greater than 47,150
24%: Taxable income greater than 100,525
32%: Taxable income greater than 191,950
35%: Taxable income greater than 243,725
37%: Taxable income greater than 609,350
Tax brackets for joint filers:
10%: Taxable income up to 23,200
12%: Taxable income greater than 23,200
22%: Taxable income greater than 94,300
24%: Taxable income greater than 201,050
32%: Taxable income greater than 383,900
35%: Taxable income greater than 487,450
37%: Taxable income greater than 731,200
