2024 Tax Bracket Changes to Keep in Mind

This past November, the Internal Revenue Service (IRS) released its tax inflation adjustments for the tax year 2024, which amends more than 60 tax provisions. 

These adjustments will affect taxes filed in 2025. 

According to CNBC, one of the most notable changes is that the income threshold within the tax brackets will be adjusted by 5.4% higher for inflation. This is a lower increase compared to 2023, where the tax rate rose by 7.1%, the outlet reports. 

Experts say this could mean tax cuts for U.S. filers in 2024. The CJBS team breaks down these tax tables for you here.

Because tax rates in the United States are progressive, individuals earning higher incomes are taxed more. However, there is a common misconception that taxpayers pay that top tax rate percentage on all their income. This is not true. Instead, every tax rate is imposed on the portion of your income that fits into each bracket.

The good news for 2024 is this: 

“…More of your income will fall into lower tax brackets,” CBS reports. “For instance, in the 2023 tax year single tax filers will pay 10% on their first $11,000 of taxable income. In 2024, the first $11,600 of taxable income will fall into the 10% tax bracket, which means $600 of additional income will be taxed at 10%, instead of 12% in the current tax year.” 

To better understand federal tax brackets and marginal tax rates and how they compare between 2023 and 2024, Kiplinger has published a comprehensive guide to break these down.  

Additional tax adjustments for tax year 2024 include: 

• The standard deduction for single filers has increased to $14,600, which is $750 higher than 2023. The standard deduction for those filing married jointly increased by $1,500 to $29,200. 
• The Alternative Minimum Tax (AMT), which is a system designed to ensure high-income individuals pay a minimum amount of tax, even if they have deductions or credits that would otherwise significantly reduce their tax liability, has changed its limits. For 2024, these will be $85,700 for single filers, phasing out at $609,350. For those filing married jointly, the AMT limit is $133,300, phasing out at $1,218,700. 
• Those with three or more children will see a higher maximum Earned Income Tax Credit for 2024, totaling $7,830 (an increase from $400 from last year). 
• This year’s annual exclusion for gifts has increased by $1,000 in 2024 to $18,000. 

For more details on tax adjustments, view the IRS announcement here.

Even though this is time for your 2023 tax return preparation, it’s never too early to talk about 2024 year-end planning with your advisor. That way tax adjustments are accounted for, and you pay the correct amount of tax at the right time to the respective taxing agency.

As always, the CJBS tax and accounting team is here to help you with customized and compliant solutions that reduce your tax burden, for individuals as well as businesses in many different industries. To schedule a discussion with one of our CPAs to review your taxes, you can reach out to our team here.