Published by FOX Business | December 26, 2023
Tax brackets to shift higher by 5.4% in 2024
Higher federal income tax brackets and standard deductions will take effect at the beginning of January, potentially giving Americans a chance to increase their take-home pay in 2024 and shield more of their income from the IRS.
The IRS announced the higher limits for the federal income tax bracket and standard deductions in November. The increase is intended to avoid a phenomenon known as “bracket creep,” which happens when taxpayers are pushed into higher-income brackets even though their purchasing power is essentially unchanged due to steeper prices for most goods.
The IRS makes such adjustments annually, but in times of high inflation, the increases are more significant and impactful for taxpayers. Although inflation has fallen considerably over the past year, it remains higher than both the pre-pandemic average and the Federal Reserve’s 2% target.
This year, the tax brackets are shifting higher by about 5.4%.
The higher thresholds where tax rates take effect could mean savings for millions of Americans across all income brackets.
The standard deduction, which reduces the amount of income you must pay taxes on, is claimed by a majority of taxpayers.
It will rise to $29,200, up from $27,700 in 2023, for married couples filing jointly, amounting to a 5.4% bump. For individuals, the new maximum will be $14,600 for 2024, up from $13,850, the IRS said.
Heads of households will see their standard deduction jump to $21,900 in 2024, up from $20,800.
