As we gear up for the 2024 tax season, it’s important to understand the changes coming our way. The Internal Revenue Service (IRS) has announced new tax brackets and deductions that could affect how much you owe or get back when filing your taxes. In this article, we’ll break down everything you need to know about the updated tax brackets for 2024 and beyond.
What are the tax brackets for tax years 2024 and 2025?
Let’s start with the basics. Tax brackets are the ranges of income that are taxed at specific rates. For 2024, there are seven tax brackets ranging from 10% to 37%. This means the more money you earn, the higher percentage you pay in taxes. Here’s a quick look at the brackets:
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $11,000 |
| 12% | $11,001 to $45,000 |
| 22% | $45,001 to $117,450 |
| 24% | $117,451 to $190,750 |
| 32% | $190,751 to $364,200 |
| 35% | $364,201 to $1,000,000 |
| 37% | $1,000,001 and above |
What to know ahead of filing season
When it comes time to file your taxes, knowing the new brackets is just the beginning. The IRS has also adjusted the standard deduction amounts. For 2024, single filers will see a bigger deduction, which helps reduce the income you’re taxed on, ultimately giving you some savings! Here’s what the updated standard deductions look like:
- Single filers: Increased to $14,600
- Married couples filing jointly: Increased to $29,200
- Heads of household: Increased to $21,800
IRS tax rates for tax year 2024
The changes are designed to keep up with rising costs due to inflation. This means that even if you haven’t had a pay increase, you might find yourself in a lower tax bracket or benefit from increased deductions. This can help ensure you’re not paying more taxes just because prices are higher.
Tax exemptions and credits
Another great piece of news is the bump in the Earned Income Tax Credit (EITC). For families with three or more qualifying children, the maximum EITC for 2024 will be $7,830. This is significant as it helps low- to moderate-income working families by reducing the amount of tax owed and potentially increasing their tax refunds.
What about my health savings account contributions?
If you contribute to a Health Savings Account (HSA), you’re in for a treat! The limits for contributions have also increased for 2024. Here are the new limits:
- Individual coverage: Increased to $4,150
- Family coverage: Increased to $8,300
This means you can save more money tax-free for your medical expenses. Make sure to take advantage of these benefits to help manage your healthcare costs!
Are tax brackets changing for tax year 2025?
Looking ahead to 2025, you’ll be happy to know that the IRS plans similar adjustments. The standard deductions will increase, and the Earned Income Tax Credit will rise to a maximum of $8,046 for qualifying families. This means you’re likely to benefit even more in the future!
As the 2024 tax season approaches, make sure to keep these updates in mind. Being aware of how the new brackets and deductions work can help you plan better and potentially save more on your taxes this year. Always consult with a tax professional if you have questions about your specific situation!
