Consumer Alert: IRS releases new tax brackets that could help many Americans
When you file your taxes in 2024 and 2025, you may get a bit of a break. The IRS just released the brackets for the 2024 tax year. And they indicate in the years ahead, some Americans may get a bit of relief.
When we filed our 2022 taxes this year, many pandemic tax breaks had expired, resulting in bigger tax bills for many. And now we’ve all suffered through record inflation in 2023. That means many of us were vulnerable to “bracket creep,” a phrase which refers to an unpleasant phenomenon when our wages go up because of cost-of-living adjustments, pushing us into a higher tax bracket. But our standard of living hasn’t changed because inflation has off-set our wage increases.
So, the IRS tries to account for that. and when you file for the 2023 tax year, you’ll get a pleasant surprise. The IRS raised all tax thresholds by 7 percent. That’s unusually high, but we’ve experienced unusually high inflation. But tax rates remain the same.
Let me explain. Current law dictates that tax rates are 10 percent, 12 percent, 22-percent, 24 percent, 32 percent, 35 percent and 37 percent. While that doesn’t change, the amount of income that gets taxed at each rate is changing as well as the standard deduction. For example, a married couple earning $200,000 in both 2022 and 2023 will save $900 in taxes when they file in April because more of their income will be taxed at a lower rate,
And just days ago, the IRS released the new tax brackets for tax year 2024 that you’ll file in 2025. And again, a bit of a break because of the rate of inflation. The IRS raised the tax threshold for all brackets by 5.4 percent to assure that you’re not pushed into a higher tax bracket just because of cost-of-living increases.
And your standard deduction is going up as well. Take a look at the changes over three years.
Individual standard deduction
- 2022 tax year — $12,950
- 2023 tax year — $13,850
- 2024 tax year — $14,600
Married filing jointly standard deduction
- 2022 tax year — $25,900
- 2023 tax year — $27,700
- 2024 tax year — $29,200
It’s important to note that more than 85 percent of Americans take the standard deduction. Bottom line, the hope is that when you file for tax years 2023 and 2024, it won’t hurt quite as much because the IRS has raised the tax thresholds and deductions to account for inflation.